If you have ever been in an auto accident, you know that insurance adjusters from both sides examine the accident to determine the comparative negligence. If the fault was fifty percent yours, you are responsible for 50 percent of the damage.

Having tracked hundreds of thousands of foreclosures, we have yet to see a single case where the owner was making their payments, did everything right, and still lost their house. This seems to be lost on most that see foreclosures as “the problem”.

We have long said foreclosures are not the problem, negative equity is. Despite what you may hear about the housing crisis, negative equity was not caused by a downturn in the economy, nor job loss. A run away credit bubble caused it. While we believe banks and government deregulation were primarily to blame, do homeowner’s really have no responsibility?

Lets look at two real life examples:

  1. Owner purchases a property in 2004 for no money down. Over the next two years she pulled out $140,000 of equity. In 2007 she defaults on the loan.  In 2011 the bank takes the property back in foreclosure. One year later, 2012, she is finally evicted from the property after living there for five years without making a payment. She is now in the news for breaking back into the home to fight what she says is an “unlawful foreclosure”. The lender was forced to secure the property with steel doors and window coverings to keep her out. What really are her damages? What consideration does she deserve? What consequences should she suffer?
  2. An eighty-year-old couple in poor health needs money for medical bills. They are collecting social security and yet qualify for three back-to-back option ARM loans in a three-year period, resulting in outstanding debt of $500,000. Each time they refinanced, the loan fees and prepayment penalties nearly exceeded the amount they received at close of escrow. Now that the payments are increasing, they can no longer afford to stay in the home they have owned for 30 years. Clearly they were refinancing of their own free will, using the cash they received, but were also put into loans they could obviously not afford. Who is at fault here? Should they be entitled to live out their final years in the home?

Both of these examples are of people who took cash out of their homes. Should the rules be different for them, then for those who purchased with no money down and never took cash out, but are now upside down? And what about those who did everything “right” and put 20 percent or more down, yet now find themselves underwater?

These are real questions of fairness that we rarely see addressed.

First it seems to us that it would be fair and equitable, to not allow any principle reductions on cash out. Instead we think the underwater, cash out, portion of any mortgage should be converted to unsecured debt. This allows lenders to fully pursue collection, while allowing borrowers the right to eliminate the debt in bankruptcy without fear of losing their home. If the borrower doesn’t want this option, then they can try to negotiate a short sale, or deal with the consequences of foreclosure – fair all around.

As for principle balance reductions, those should be strictly limited to amounts used to purchase a home, where the home has since fallen in value, through NO direct fault of the borrower. This is fair because banks were in a far better position to realize that prices were unsustainable at the peak, then the average homeowner, who kept hearing that prices would only go up, or that there was no bubble.

What’s most unfathomable to me is why anyone condones breaking the law by suggesting its ok to break and enter into homes that have been foreclosed on. Even if one intends to take a stand, is that really the right way? And is foreclosure actually bad for homeowners? Why in the world would anyone take a stand against a process that, at least in California, allows you in many cases to walk away from a huge debt with nothing but a hit to your credit report. In some countries not paying one’s debts means jail time.

The saddest thing I see today, is that the worst actors, who signed up for the worst loans, and cry the most about unjust foreclosures are the most likely to get help from the banks. While prime borrowers with great credit, traditional 30-year financing who didn’t use their house as an ATM, and showed respect for the law, rarely get a decent loan modification no matter the circumstances, and often have short sale requests declined.

What do you think? Can you honestly say only the banks are to blame?

 

90 thoughts on “The housing crash was no accident; maybe it’s time to start assigning blame!

  1. No one is talking about this. We’re part of a foreclosure committee in our local town and not one person what’s to talk about the other side of the equation. Not all foreclosures are created equal. The refi money idea you have makes a lot of sense.

  2. The above examples are true . . . but, here’s my take on it: none of these people could have refinanced without “somebody” making that easy money available. While the homeowner has ultimate responsibility, nobody in the lending industry can honestly say that most people have the vaguest idea how these loan programs work. Because loans are a commission-driven business, loan officers and their bank-employers knowingly approved thousands of loans that they KNEW the borrowers could not afford. There are many mortgage fraud stories where it was proven that the loan officers did not properly explain or disclose how the loan program worked (Option Arms, neg-am, etc.) and in fact many loan officers falsified loan applications. Then there were the crooks at WaMu who pushed well-qualified prime-rate borrowers into subprime loans so the entire food chain there could collect higher commissions.
    There’s plenty of blame to go around, but the oil that ran the housing engine in the early 2000s was easy money and throwing out well-established underwriting standards. That is 100% on the banks.

    • Many Americans don’t want to take responsibility for themselves and government policy seems to be insentivizing “bad” behavior. What upsets me e most is politicians are using false rhetoric to boost their political position even though it makes no sense. Consider the proposed “millionaire tax”. Every American can take advantage of the tax breaks given for investment (capital gains). But most Americans would rather “invest” their money in depreciating assets like cars and tv’s that drop in value every year. As a result, they never actually own a real investment and never get to take advantage if the tax laws. Now, the government is proposing a tax change that will actually penalize those that invest their money wisely and take risk and subsequently benefit from lower taxes on those investments. If politicians want to actually be useful, perhaps they should encourage Americans to think more like the millionairs and invest their money. But unfortunately, there are more votes in enabling the victims than trying to empower them.

      • Further we should thinking about taxes on income anyway:
        1. easy to avoid

        2. overly complicated

        3. punishes savers

        4. raises hurdle rate for investments reducing job creating invesmtments

        5. Myth= Corporations pay tax! Employees pay tax through lower wages. Consumers pay taxes through higher prices. Investors pay taxes through lower returns. Corps represent a easy and insidious way to collect tax on the stake holders of corporations. Corps make a great political skape goat especially for Dems.

        6. National sales tax is the broad based solution.
        a. every body pays and themore you spend the more
        you pay
        b. Black market players pay
        c. Lowers hurdle rate for new and risky investments; i.e.
        grows the economy vs. after tax investing
        d. Eliminates the need for us to tell the IRS every year
        where we earn our money and how we spend it.
        Should they have this info? Can they keep is safe?
        e. YES IT IS FAIR. Those who spend the most pay the most.
        For the less fortunate we put in place a sales tax refund
        system.
        f. HOW MUCH OF A SALES TAX RATE. I calculated based on
        US Government data for 2010 the sales
        tax rate would need to be 19.4%.

        I know it is more complicated because you will need estimate the growth invesmtment and decline in consumption. but we need to move away from an economy based on 70%+ in consumption based GDP.

        Give me your thoughts.

    • I disagree. If you, the customer, don’t know or understand what you’re getting and you sign anyway, is it really the fault of the loan agent?

      So what if the loan agent works on commission? Does that mean they are putting a gun to the borrower’s head and threaten them with their life if they don’t sign? What has this country become in constantly deferring responsibility? No one Made these people sign loan docs and get a loan. No one Made them get a Neg Am, NINA’s, SISA’s, No Doc loans. If those people are not willing to be responsible for the consequences then they deserve what’s coming to them.

      If you don’t feel comfortable with a loan program then don’t sign it’s as simple as that. People refinancing to pull cash out, run up their credit cards and then do it all over again and then claim they were blindsided by not knowing the loan programs? This country is turning into a bunch of whining idiots!

    • Your take on easy money is like blaming the vehicles for causing a auto accident. Or blaming the gun when someone gets shot. If I go to Vegas and loose all my money, it must have been Las Vegas’s fault, you know, all those promises of easy money. In this country, we are slowly losing personal responsiblity and becoming a group of victims

  3. That is 100% on the banks……who were mandated by the Fed to lower lending requirements so “more Americans will own homes” Have the Government less in our personal lives and you will have many less problems and more of your tax money to do the things they should

    • Amen! For blame to be allocated “fairly” one must look to the Federal govt and the Community Reinvestment Act which forced banks to make bad loans to begin with. Imagine if a legal precedent were established by a parent successfully suing a school for their child unfairly failing to qualify for graduation. Whose fault would it be when schools made it an unspoken policy to pass unqualified children to the next grade? And years later, who would be blamed when those children possessed college degrees but no capacity to hold a good job?

    • Kara Jensen says:

      I agree, the Fed did start this. And, lenders could have set aside their own interest ($$) and done a better job of advising their clients.

    • The Government did no such thing. Do you have a url that doesn’t point to some silly rightwing drivel about the CRA?

    • 100% on banks? That’s like saying you were driving drunk, speeding, lost control of your car and ran into a tree then turning around and saying that it’s the manufacturer’s fault.

      Where is the ownership of the borrowers? These poor defenseless borrowers that were oh so swindled by these big bad banks. Now if someone fraudulently used someone’s identity to get a loan that’s another story. But when a person Willingly, Willingly, signs loan documents and then receives X amount of dollars spending it on God knows what and then turning around saying they were swindled??? How does that even remotely make sense?

      • We’re not all like that. A whole bunch of us could afford the loan when we got it, even though the loan broker steered into a higher-interest loan than required by credit scores (borrowers really have/had no way of knowing that, for the most part), or falsified income, or worked fraudulent appraisals to meet inflated sales prices, etc. (don’t scream in defense of the banks, this is well documented nationally and a bunch of lenders signed federal consent orders to stop doing it – but kept right on doing it.) But lucky us, we got laid off/re-organized out/injured/sick and couldn’t afford it any more – and didn’t take out any cash before then, and couldn’t take any cash out once not working.

        But the banks wouldn’t assist when you contacted them, or pretended to assist and then said haha you lose, we aren’t modifying even though you did what you were supposed to for a lot longer than you were supposed to until we got around to sending you your mod documents – or sent modifications or other solutions that homeowners were paying on as they were supposed to, and banks canceled the deals, just because. And oh, by the way, we reported all your Trial Period payments to the credit bureaus as delinquent payments, because we consider them partial payments, so haha again, your formerly excellent credit score is now 200+ points lower.

        Eventually, they threaten you in one way or another, foreclose whenever, and the only sensible thing to do is to stop paying at that point. They return your payments when they are getting ready to dump you, saying you’re too far in default because of all those partial payments.

        Lenders make a lot more money on foreclosures than they do on modifications – especially when they have no money at risk in the first place because they were paid off when the loan was securitized – about a minute after the ink dried on the original loan docs.

        So gloat at your own good fortune and how smart you are to not cash out on the loan, but don’t paint all of the rest of us who got screwed plain and simple as irresponsible money-sucking idiots (see my long story a ways down – I got screwed at both ends on my deal.)

        The power in the deal was/is held by the banks. You want the house, you take the loan docs with no changes. Unless you have big bucks, and lots of options for buying real estate, you have no real say in the terms, because what they offer you are maybe 2 or 3 equivalent sets of terms for interest and points, and your choice is cash up front or cash later, but pay them. And an option-ARM sounds irresistible if you are young and starting out, or mid-career expecting further promotions, they glamorize them – see, you can get into a nice house even in a heated market, because your payments start lower and then payments rise with your income after a couple years! And see, the appraisal came in showing the house is worth what we’re paying!

        Do you really think the loan broker gives half a crap whether you really will get raises to pay later? They are good sales people, and they have sleazy connections to reinforce the details, like those inflated appraisals. He got his commission on the interest spread and upfront fees. Have a good life, sign here. Most people are not sophisticated about real estate, it is something they only get involved with a few times in their lives, and the broker glosses over questions or gives outright lies to make the deal happen. Even people who are sophisticated and understand at least the basics got snookered by those deals going into securitizations.

        If you don’t believe it, there are a bunch of interesting depositions and case filings, including judicial opinions, about all this on Scribd and some law school library websites (Cornell, and Lousiville Law come to mind), and on the federal oversight agency websites. Quit listening to Faux News* and read the real thing. (*Really. A major survey in July or August 2012, I believe, found that Fox News followers were the least-informed people of all news consumers. They don’t care about fact-checking over there, they spout opinion as news. Go read the underlying real news.)

        And quit blaming the victims. Listening to you all talk about it with those denigrating adjectives is like listening to the old garbage about “welfare queens”, so many supposedly getting away with so much, see, there’s an example on the news! Right, nothing like broad generalizations from 1 case to hundreds. Might check over on MedLine too, run a search on mortgage delinquency and health, or foreclosure and depression, or any other combination of similar terms. Studies (multi-year studies, tracking people’s heatlh) are starting to get published about the real impacts of being stuck fighting these fraudster banks for years.

        Mortgage delinquency and foreclosure are not easy on homeowners. They are on all the lists of life’s most stressful events. Its a lot of hurry up and wait and wait and wait for that letter or phone call or sheriff at the door and then hurry up and respond or you lose. Served with a side of verbal bullying, just for good measure. And people do have furniture and household items and personal things and recreational items, and it can’t (and shouldn’t) all be sold for pennies on the dollar at yard sale. And the impacts on the kids of the not-by-choice uprooting are huge and long-lasting. Easy? Tell that to the families of recent suicides due to shame and hopelessness after arbitrary legal decisions ignoring facts about who really has the right to foreclose.

        Hope you never have these problems, but if you do, and you get hungry, they say shoe-leather will stave off your hunger and newspapers keep some of the cold off at night. Isn’t that what you are saying people in this situation deserve?

  4. It all started with Barey Frank when he wanted everyone to own a home and this lead to the “no document” loans with no verification of job income or savings accounts and now good old Barney denies he ever said it.

  5. Kenneth Baughman says:

    All you have to do is to amend the Ch 13 Bankruptcy Code to allow cram downs to the value of the property and write off the unsecured part of the loan. Easy

  6. What about people that were laid off or had their paychecks cut, then had no equity left in their homes due to the market manipulations of real estate investors who artificially jacked up home values? It’s overly simplistic to blame this solely on borrowers.

    • What do you mean, “investors manipulated the market. They had nothing to do with it. The investors are all taking a major hair cut. In Econ 101 you learn that what controls a market is supply and demand. When you dump a couple of million unqualifed buyers into a market, all wanting to buy a home, you increase demand, and as a result the supply is smaller an prices rise. So an investor buys a loan on a property valued at $500K and now the loan he owns is worth $200K, he just lost $300K in real cash. The, nothing down borrower lived in the house for payments cheaper than rent and now gets to walk, without losing a penny.

      • No, supply and demand is the former official explanation for market controls. The reality is it is manipulated by the finance industry, ie., Libor scam they put on, all those MBS/REMIC trusts with nothing backing them up but sold for huge profits anyhow, and the huge profits made by the TBTF and a few foreign banks (look at it in Bloomberg) on the point spread from short-term loans in the billions from the Fed, secret for close to a year.

        The investors in houses aren’t taking any haircut, they are getting enormous bargains, can just sit on them or rent them out, use to trade for other properties for their tax needs, etc. It is the amateurs and the homeowners who got scalped when the bubble burst, as all bubbles do.

        • many many opinions getting thrown around….I am partuclarly sturck by Mindymac and sympathize with her plight. Those neg am loans were like how people descibed the benefits of credit cards to me when back in college….dont live poor now…buy that stereo on a credit card and then when you graduate and get a good paying job, then you pay it back….sure that can work, but man, you have probably doubly spent for the item by the time you actually pay it off. Is that really a good deal? the smarter person does not buy on credit. problem with Neg Am loans it was a “new” product so people didnt have a history of knowledge to really know if it was a good product or not. 20/20 is hindsight.

          Anyway, as an ex-subrime loan rep for 10 years and now working for a small regional lender fighting off buy back claims from the big boys (Fannie and Freddie, along with Citi, Chase, BofA, Wells, etc) I have seen a lot in this industry and have much first hand knowledge. First off, I can say the mtg brokers didnt give a rat’s ass about the benefit of the borrower. it was all about closing the deal making a commission and going onto the next deal. And yes the lenders out there pushed us loan reps hard to bring in more and more volume to make more and more money for themselves. I was rewarded quite handsomely for being very successful. Including company paid trips complete with concerts by Cher, Jimmy Buffet, Aerosmith, etc etc…Yes I lived the life you read about in the newspapers….. One of the factors in this whole mess was they made the standards too easy to qualify. It got to the point where mtg brokers didnt even ask for income anymore becasue it was too complicated for them to figure out if their borrower actually qualified for a loan. It was just easier to state the income and go that route. But really, even beyond all that, I truly beileve the main culprit was the Neg Am loan and the 100% financing loans.

          For the Neg Am loan, just as it happened to Mindymac, people paid too liitle of a mtg payment, many didnt understand they were adding prinicpal to their loan balance or didnt fully realize how negative of a factor that would be….the neg am piling onto your loan balance was just too much and if they couldnt afford the higher payment to pay it down…….well….that contributed to the overall plight.

          The 100% financing also contributed mightlity to the downfall. The reason being, if you bought a house for $500k and put no money down, once the trouble hit, you could walk away. No harm done, you didnt lose any money. Shoot, you probably put less into the deal that a typical renter does. But…had you put $100k down, then when the values starts to dip a little bit, you arent so quick to walk away becuase you have $100k of your own money invested. People dont like losing money so they tend to stick it out a little longer. Yeah….that 100% financing loan product really was a major factor in my opinion. Too easy to get and no skin in the game meant any sign of trouble and blam…out the door, no harm done…it jsut started the whole downward spiral and then was amajor factor in escalating it.

          Thats my take for the then…And now? All those big boys that were so happy to churn out loans and buy loans from smaller regional lenders sure are quick to blame all the originators for not doing their due dilligence back in the era when everyone looked the other way. Send some of that TARP money to the little guy (small regional lenders) and we would be happy to pay on all those buy back requests. Those big boys are sooooo two faced! (‘Bring me all those stated income deals…and we’ll look the other way while we are making money…but 5 years later, you originating lender must buy back this bad loan becasue your borrower lied on their application!’)
          -

          • I don’t have a 100% nothing-down loan. I put down half on my house to keep the payments low – but in spite of good credit I ended up paying the broker commission with interest rate probably a half-point higher (at least) than it should have been, so the payment could have been lower. And you’re right – with half down, you don’t walk away, especially if you put more in after moving in, in the form of renovations and repairs. But you misread the thing about partial payments that I wrote – I agree with you about neg amort. loans, but I had a fixed rate loan, and what were put in credit reports as partial payments were all the HAMP “Trial Period” payments that I paid (and that everybody else paid far longer than the 3 months of “official” Trial Period).

            The lenders say that because the loan hasn’t officially been modified yet, even though it’s a full payment under your Trial Period agreement, and will be the amount of your new payment under a final modification (if you’re lucky enough to get one), it’s a partial payment – and thus, you get late fees once you are “withdrawn” from the program, illegal cascading late fees, with payment on time for the month you send it in, but considered late for the payment they are applying to, probably from 6 months or a year ago, as they start applying them to the partial payments from HAMP. Which they already went back and charged late fees on the instant they kicked you out of the program. And they expect you to start paying these ridiculous high payments to catch up, adding half again to the original payment amount, and if you couldn’t pay that, how do they think you are going to pay it 50% higher?!?!?!

            I sure wish I hadn’t put down so much, because I can’t get at that money now. And I will not allow me to end up with none of it and the bank that is now pretending to own the loan but never did getting all the equity I should get out if I were to sell it, because they have fiddled with my account history, moving things around, adding fees they shouldn’t have, so I don’t trust their payoff numbers, and I have asked for audit multiple times. Answer “too expensive and outside the scope of an individual account. ” (Heard that one the week the secret Fed loans with the $4 billion profit on the interest spread was announced. Excuse me, you get $4 billion in secret and can’t pay $1000 to get my account cleaned up, if that?)

            And I can’t even get in on the AG settlement because Freddie Mac actually owns my loan, not the TBTF pretender lender. Unless my loan was one of the buybacks but I can’t find that information. And somehow, I ended up not eligible for the earlier “nationwide homeowner retention” plan or whatever it was called (Countrywide settlement), although I bought in the right time period, and had a Countrywide loan. Or the HUD program for Hardest Hit, because at least in KY, it’s only for those behind and underwater and unemployed, not for those out of work because of disability. Why sure, I’ll just bend over for y’all, you can shove a boot at me, I’ll understand. NOT!

            BTW, I didn’t lie on my application – my broker did, changed amounts, added things after I signed, etc. And my foreclosure judge seems to think those people in that foreclosure mill (1 of 3 they have against me) and the company itself are just dandy, no matter how many prior settlements and consent orders they have since violated!

  7. You are right! We see lots of homeowners abusing or taking advantage of system. They are not really ‘loosing ‘ money becos they took the cash out and even bought another house for all cash and let the underwater house go or other variations… or even if they did not take cash out they stayed there free for years..a majority are not real hardship cases. only neg equity How come in news we never hear much about this?
    This hurts other homeowners that pay their mortgage but loosing equity. Homeowners who pay on time should be helped out too by being able to refinance/ modify. Where in the world where there is appreciation(gain) the owner gets to keep the profit and where there is loss the banks / gov and public has to eat it?

  8. I agree with some of your analysis but not all.

    First and foremost, all of these people mentioned would not have been able to take money out of their homes had the banks (investors) not created irresponsible loans. Playing the blame game, the banks allowed these people to take money out of their homes knowing what their financial situation was and knowing the risk. Had the banks not created these liar loans, no homeowner would have been granted these loans.

    Wall Street (investors) knew that what goes up eventually comes down (in fact most people know this). Wall Street is to blame period. They knew that the income levels did not support the rising cost of owning a home, so they created liar loans and in doing so not only did they screw with family livelihoods but with our economy..just so that they could make a quick buck. I fault loan officers and brokers and banks only 50% at fault since they did not create these loans nor the underwriting criteria for “No Doc, No Asset” loans. The Federal Govt nor the Community Reinvestment act did not create these loans either…Wall Street did.

  9. For those who feel the Fed is to blame or the Community Reinvestment Act, consider that without the CRA and other regulations bank would never make loans to poor communities. Given that owning real property is the #1, #2, and #3 way up out of poverty do you feel under NO circumstances should we as a community (via our elected govt) support the efforts of the working poor to reach the middle class? That is what the CRA is intended to do. The real people who the program was supposed to help got trampled when housing affordability plummeted and now that things are affordable again we want to remove these programs and consign them to a lifetime of poverty. That’s how we take care of our communities and eliminate blight? I think not. We’re using indignation at the choices of a few bad actors who followed the trend to justify our unwillingness to help each other. Purely selfishness and discrimination masquerading as righteous conservatism.

    • If your poor and can’t afford a house, why should the government help you buy one. Whose fault is it that you’re poor? I was poor once and wanted my own house, but no, I had to rent, BECAUSE I COULDN’T AFFORD the down payment, at that time it was 20% and the house was $50,000. I went to night school, on my own money, graduated, got a better job and in a few years, saved the money for the down and bought my first house. The key was a better education. Ignorance is a very expensive commodity for never being in short supply. Everybody wants this to be someone else’s fault. Who’s name is on the note?

    • Adam, your youth is showing, tuck it in. Giving poor people things so they can feel good about being poor has never worked. Pride is what they’re looking for. Not pride from being poor but pride from over coming their circumstances. I give a homeless guy $5, how does this help him? He eats one meal.

  10. You know, if the government had not interfered, and defaults had been pursued in a timely fashion, and loan modification meant…getting an extension or lower rate – not free (tax payers) money, not only would this be over with by now….we the paying portion of the public would not be picking up the bill for everyone else.

    Let’s stop being a welfare country! Help your neighbor, help your community and stop expecting the government to fix it all!

  11. KUDOS to you for taking on the risk of apportioning the blame. Very simply, it’s all about greed. And Gordon Gecko isn’t right. While I believe your article is right on about the little guy, I also believe that Congress in its “infinite wisdom” will never get to the bottom of the Wall Street debacle. They’re too busy posturing for the next election while Wall Street Banks like Goldman Sachs are still going short against their client’s investments. And if we are so naive to believe that CDO’s will be eliminated, we’re all in trouble. There will just be another scheme to replace them. I still think we shouldn’t have bailed out the banks. We have to pay for this sometime. The sooner, the better. And for Paulson to cross his fingers hoping that the banks will finance the home industry while getting interest free money from the Fed is as stupid as the homeowner using his home as an ATM machine. I realize this sounds like a confusing ball of string. But someday we must unwind it in order to avoid the same problems again. Thanks for letting me vent, and keep up the good work.

  12. Douglas Smith says:

    I absolutely agree with Michelle. But the picture is much bigger and much worse. Harvard Professor Howard Husock saw the meltdown coming years in advance, because he noticed that US presidents and Congress were giving orders to banks about their lending policies. Husock expanded this article into a book in 2003.
    http://www.city-journal.org/html/10_1_the_trillion_dollar.html

    Of course ACORN and other left-wing community groups had their own ideas about how to qualify borrowers, since it was the banks’ money at risk, not theirs. We all heard about ACORN’s ethics in the Andrew Breitbart video exposes aired on Fox in the summer of 2009. But even mainstream mortgage brokers got involved in brokering loans for obviously unqualified borrowers. An honest mortgage broker in San Francisco told me he threw a rep from a top Wall Street brokerage house out of his office for trying to enlist him in the scam.

    The second stage that compounded the coming disaster was Wall Street’s brilliant idea that financiers could package batches of these risky, high-interest loans into derivatives, which they then sold all over the world. This leveraged the damage and magnified the collapse worldwide when the underqualified borrowers stopped paying.

    It was all based on greed and deliberate self-interest — making money or well-meaning social policy (pandering to voters) with ruthless disregard for financial common sense.

  13. The best part of all of this back & forth is we are always eager to point fingers and blame that guy for not being responsible. Meanwhile, the banks are cashing in on our tax dollars, our equity loss and our inability to get organized and take a stand against the policies that allow a business such as the banks to put products on the market that are set up to fail. We expect the little old homeowner to take responsbility and we will bash them into the ground telling them so. Then we turn around and bail out the banks and have the nerve to defend them as if they were not a part of the problem…..THEY ARE THE PROBLEM. Because someone took cash out of a property, bought a property or had investments they are still entitled to the due process of the law. As the banks continue to be above the law…it is near impossible for a homeowner to exercise their rights even in a bankruptcy court. Once the banks finishes foreclosing on the ones who are behind they will then start to go after those paying on time…yep…for paying the wrong beneficiary because they will create “new” documents to show the homeowner was paying the wrong person all the time and here is the freshly minted “robo-signed” docs to prove it……..

  14. Well put! If they keep short sales to those showing legitimate hardship & lender predatory practices its will give these homeowners a better chance to re-build their credit & buy in the next 2-4 years.

  15. Is the stock market fair? Do people lose money in the stock market? Do people make foolish buy and sell decision in the stock market? The answers just like life the stock market isn’t fair, and yes to the last two. In life there’s winners and losers, we all have been on both sides. Some 15 years ago I lost a huge sum of money in the stock market, due my own foolish mistake. The way everybody thinks today, I should have sued the broker for my losses and claim some dishonest broker tricked me into the investment. What about the poor slub who’s upside down has a good job and is making his payments? With this, “it’s not fair”, attitude we are working with a house of cards. Take the losses and move on

  16. I am a real estate sales broker and I know quite a few people who have either short sale their home or had it foreclosed. For the most part they lost their income through either downsizing or lay off not because they were stupidly investing in more than they could afford or greedily pulling money out. It’s the same as if a tornado wiped out a home and saying “well they should never have bought a house there they should have bought on the other side of the street that didn’t get hit”. When they bought their house they had good jobs and good income but that changed. Should there be zero down loans, probably not, but I can truthfully attest that low down payment helps get people into a property and often pay the same on their mortgage as they would for rent. What is wrong with that? I think the government should have MORE regulations on the banks that don’t let them take advantage of either buyers or current owners. I can’t tell you how many times I have had to deal with a lender who has a second loan who tries, often successfully, to extort more money from a seller, me or buyer to allow a short sale after they have agreed and the first lien holder has approved a reasonable amount. I can’t tell you how often I talk to homeowners who are by circumstances beyond their control unable to afford their current payment but the banks won’t even listen to them. My parents are in that situation right now. Their interest only payment is 4 times what a current mortgage would now go for fixed, yet we can’t find anyone to refinance because they are now retired and their income has dropped significantly and the property now has decreased rent. We have tried to sell with no luck. Their lender won’t even think about a refi for them even though this property has 40% equity in it. I see so many banks lying and cheating or like this on refusing to even talk to us. I don’t think it was the mortgage brokers at fault as they were duped like the rest of us regarding programs that should have had more regulations. We should never have bailed out the banks. Too big to fail has just consolidated further and are out of control. We should have bailed out the people (remember FDIC insured) and broken up these megaliths. Unregulated is the problem not the solution.

  17. I’m a real estate broker as well, I lost a career, I had 4 daughers all under the age of 16. I was without work for a full year. I had a mortgage in CA, I lost the house, who’s fault was this, MINE. BTY I only have HS education. I pulled my self up, made all the money back plus a lot more, put 4 daughters through college and 4 weddings. I didn’t whine about the rain I learned how to dance in the rain. I didn’t look to anybody to get me out of the rain. I don’t mind helping the helpless but not the clueless

  18. This all had to be orchestrated by a corrupt government. There is no way that nobody saw this coming. It’s sad but there is no other logical explanation.

  19. Patrick Ferry says:

    After listening to 1000s of Realtor calls to home owners all over the country over the last 3 years … i commend these questions and perspective! Pray the leaders/decision makers can honor those with some integrity vs those who partied off the high of the bubble.

  20. Brent Hopton says:

    Nice Article Michelle! It is AMAZING that the ONLY people I know that have lost their homes to foreclosure have a POSITIVE GAIN on the entire situation, and yet they are blaming the bank, blaming their realtor, blaming everyone but themselves for NOT having the Responsibility to say NO. EXAMPLE:) They put 0 money down on a $400,000 home, made payments of $3,000 for 1 year and then lived in the home for 2 years with making NO payments = $36,000 for 36 months = $1,000 per month for 3 years, when the SAME HOUSE WOULD RENT FOR $2500 per month! They came out $54,000 AHEAD! And they are still whining about “being taken advantage of”. PLEASE. Lets get back to how we were 100 years ago with LIMITED federal government, eliminate all these wasteful govt programs that reward bad behavior and WORSE YET, CREATE AN ENTITLEMENT MENTALITY FOR OUR SOCIETY. If we can’t stop this federal government and the rapidly escalating $15 trillion debt, we are going to be like Greece, or even worse. Tell your congressman/woman to STOP PUNISHING OUR FUTURE GENERATIONS AND STOP SPENDING MONEY WE DON’T HAVE!

  21. i recommend “The Bush Betrayal” by James Brovard for those like Monique and Craig who do not get it. Brovard is no right wing conspiracy guy and he clearly spells out the role that both Bushes, Clinton, et al had in the forcing of banks to make sub standard loans in order to achieve “fairness”. The only reason you won’t read the book is that you are an idealogue incapable of thinking for yourself instead of just swallowing the koolaid and believing what someone else tells you.

  22. There’s a ton of blame to go around. Myself included despite the fact that I am a conservative. In my opinion, Bush made a lot of mistakes. However, he and Chris Cox sent multiple letters to Congress warning them that we could not continue on the same path of inflated real estate being leveraged by mortgage backed securities. Since he lost his bully pulpit over Irag, it was obvious they shined him on. So we end up with “too big to fail” for which ALL of us will eventually pay. My only hope is that I don’t leave it as a legacy to my grandchildren.

  23. Yes, it does take two. However, shouldn’t the burden be greater for the party that has the greater knowledge? Banks knew that the loans they were making were setting people up to fail. I mean, who would loan money to their friend that doesn’t have a job, or doesn’t make enough to cover his current bills. This made it nothing more than a game of “hot potato” for the banks, with the losers going out of business, and the winners getting bailed out, and the assets of the losers. (just like the game of monopoly). Coincidence? I think not. The people are on the hook for all of the money “lost”, so how important is it to assign blame?

  24. Not only am I a conservative, but I am also a lawyer and a real estate broker. With that in mind, I have volunterred me services pro bono to the Legal Aid Society specializing in real estate for the elderly. As a consequence, I have witnessed 1st hand the homeowner/victims of this mess we are experiencing. There are some cultures who prey on their own people because they don’t understand the system. Sffice it to say that their remedies available. Unfortunately they can be expensive. Track the history of the “HOPE” that was expected in Supplemental Order 09-09 (HAMP and HAFA), and you will see a dismal failure. And just because it was Obama’s creation (READ THE CONFIDENCE MEN) doesn’t mean it should be laid at his doorstep. Also, take a look at the las Attorneys General law suit which netted 25 billion. This robo-signing law suit will net about $2,000 per homeowner about 3 years from now. In the meantime it will make great press for some attorneys general to become governor. In conclusion, we must have sanctity of contract to which there are defenses. Yes, the big guy usually comes out on top. And this is precisely the reason I give some of my time for the defenseless.

    • Thank you for your service, you’re doing God’s work. I think we should look at the mortgage docs and find the clause that lets a borrower stop making payments and still be entitled to live in the property. I looked in my docs and I didn’t see any such clause. If the borrower stopped making payments does it matter if Joan Green or Mickey Mouse signed the foreclosure paperwork? The FACT is the borrower agreed to make a stream of payments, 360 of the most of the time, and for whatever the reason can’t. Ok you say, but they didn’t know what they were signing. If this is the way out then everybody who has a mortgage has an out, because nobody reads 89 pages of residential purchase agreement nor does anybody read the loan docs.

  25. As a Real Estate Broker in California I strongly disagree with you. Grow up young lady It is the Government and Banks fault the Real Estate Market collapsed. It is their responsibility for them to make it right. Upside down homeowners have no other choice but to walk. No one is helping them. A short sale takes 3 months to a year to complete. A loan modification takes up to a year to get a decision from a bank. Would you keep paying for a car you paid $150K for and in a year it is worth $15K. Give it back to the car dealer. Homeowners walking are making a business decision, cut your loss and move on. In doing so they have damaged their credit and will have to correct this in a couple of years. Better than paying on a home that is worth $400k less than they paid for it. They will never be able to recoup or even break even. A business decision, walk. A California Realtor. Bob

    • Bob I agree with you. However when you say the government should fix it, this means throw money at the problem, along with new laws and regulations. Keep in mind the government’s MONEY is OUR money. So in this regard, it wasn’t me that screwed up the home loan business. I resent being asked to pay for other people mistakes. After raising 4 daughters, I’ve had enough of paying for other’s mistakes. Failure is the Rx for making dumb ass decisions. The government and their partners in this mess are prolonging the misery. Government regs allow banks to carry assets at their original booked value. So a bank loaned $600K on a property that is now worth $450K. The bank still shows that asset at $600K. Misleading? You bet it is. The Fed is keeping interest rates at artificially low. This is why a Toyota Camry is $30K and not $15K. Or a home in a less desirable area is selling at $250K instead of $95K. This low interest rate is only helping the lenders. The public is being fooled. We pay the price for the Camay because we can afford the PAYMENTS, same for the house. The public is focusing on the payment rather than the VALUE. With this focus the lenders are creating a debtor nation, with the governments help

  26. Bob is correct, I am an active broker in CA and have been for almost 50 years and still working full time. The government started this when they allowed unqualified (no document) buyers to purchase who had bad credit and low paying jobs, but the banks and agents did not have to verify the income and the banks made those loans because our government (Barney Frank) told them to. The buyers thought they could buy a $300,000 home they could not afford and tough it out for a year and then sell it for $400,000 and keep the profit and whenthey all started doing it, then it did not work.

    Think back to the days when one put their house on the market at a reasonable price and had five offers and the winning bid was $25,000 more than the asking price and it was because the demand was so high due to the buyers in the market who were not qualified to buy if a bank verified their documents. But the bank did not do that because the government told them not to and thus we had the “no doc” loans that increased the demand and drove the prices up and that is the root of the problem.

    When the market could not support the prices, then everything began to fall. It is another case of allowing people who have not been responsible and taken care of there lives with caution to participate in the rewards that the people who are responsible enjoy.

    I will probably take a lot of flack from this, but most of this boils down to “delayed gratification”. One can walk down the street and see the beautiful diamond ring in the window and break the glass and rob the store and get it or they can save up the money day by day and buy it. The ones who bought on the no doc loans enjoyed the instant gratification for the moment and those of us who did not break the glass but saved our money and bought it legally enjoyed it more because we delayed gratification.

    Home ownership is not for everyone.

  27. if you have a credit score of at least 600 and havent filed bankruptcy call 888-766-1965 for free foreclosure advice

  28. Actually, it did work – its intent was to help LOW income folks afford a home, i.e., lets say $100,000 – but by helping those folks buy the sellers now had to move up – the builders and the lenders filled the gap with ever bigger and more expensive homes – where I live land went from $25K to $200K in just a few years – my home which I built went from $300K to $900K – what was that – PHANTOM VALUE – driven by greed, not need – to me it was stupid and I did not play, so I did not make tons of money, like my builder friend who was worth $57 million in 2006 and is broke today – and I am still standing – I watched as people I know were duped into thinking they could afford something they could not and for some it worked for a while -
    But that is not where the failure of the banks and brokerage houses came from – the concept of helping low income families again was aimed at lowered homes – it became perverted when someone with a substantial income, say $100-150K was allowed to by a million dollars plus home , something HE could not afford, so the mortgage game (lenders making 10′s of thousands because they could) escalated – that was the tip of the iceberg-
    Then along came aggregating loans into instruments like credit default swaps, hedge funds, derivatives, etc, etc, etc, one stacked upon the next until there was an inverted pyramid where $1 of housing value supported 10′s, hundred’s, even millions of dollars of debt – Had the over valued homes been the only problem there would have been a SMALL colapse, but it was the trillions of dollars of unsecured debt stacked on top of the bad loans that caused the monumental collapse -
    Whose pockets did all those trillions end up in – well, if you look around and search a little you realize that there are trillions of dollars setting on the sidelines right now, waiting for the double whammy, LOWER TAXES (???) right – and along with that, cuts to SS and Medicare and education and all other social programs that do not increase revenues for the 1% – thats the same 1% who now own nearly 50% of the nations wealth, the same 1% who close down companies in the US to increase the bottom line for the board of directors and the few MAJOR stockholders, these same folks who would have us go backward on child labor laws and minimum wages, and the same 1% who want to tax those lower wages more so they can get a bigger tax break – we are now near where the country was at in the late 1920′s as regards who owns the country -
    Blame the poor suckers who bought into the credit myth that allowed them to think they owned something they could not, if you must – but also assess blame to the corporations and banks and brokerage house like Goldman Sachs, (who sold securities as triple A while shorting those very sales) – and use common sense and look around – in your heart of hearts do YOU think all that has gone on and is going on is FAIR? – if you do then the American Dream has all but vanished – it will remain a dream and never again see the light of reality -

  29. Some of the responses were well thought out and many right on point. However, your premise is based upon fault. If you track it all the way back, it falls to Freddy and Fannie whose policies were formulated by the Community Reinvestment Act the roots of which date back to Lyndon Johnson.
    Finally Barney Frank and Chris Dodd were instrumental in finding a way to allow greedy people to make money and to get loans that never should have been granted. Those loans were collateralized and sold on Wall St., another area where greed is no stranger.
    So, when you talk fault, talk about the government. Then, get them to govern, not to get too deeply involved in this kind of action.
    I am a long time real estate broker with 17 years previously in the savings and loan busness. From 1963 to about 1980 things were fine and then the wheels came off. It’s almost criminal what has happened.

  30. My experience as a Real Estate Broker for 30 years has been different. Yes, there were scenarios as you described, but what I have seen: Individual bought the house in 2005-2007 at the top of the market. Put anywhere from 20-30% down on a conventional loan. Due to recession, job loss or pay cut occurred -or in some instances, acute medical problems resulted in job loss. Solid citizen who had never missed a payment uses all of their resources for two years keeping up on payments until they have to face the fact that either they will never have that good paying job again or they face long-term medical issues and overwhelming medical bills. The next step is the unthinkable: sell their beloved home…but they have equity. Or so they thought. Not only is ALL of their equity gone due to the drop in market value, they cannot even sell their homes for the mortgage amount. Now they are faced with the demeaning prospect of foreclosure. It is like going through the grieving process: Shock, disbelief, depression, anger, then acceptance – and often shame. So yes, there were those who took advantage of the situation of free money and there were those who thought they could finally get a piece of the American Dream – but there are also many, many hardworking, solid American citizens who got swept into this economic firestorm and, even though they did everything right, they still came out upside down. So put the blame where it belongs: on greed and manipulation of money and the system. The banks did get bailed out.. I can’t say the same for the American people.

  31. You raise an interesting point but our personal mortgage experience in California proved otherwise. We had to short sale our home after duel job loss in 2009. We wanted to work with the bank but found that there was no response. US Bank was less than honest about all our options in California (CCP 580/726) and pushed hard for us to cash out our retirement, sell our cars, borrow money from family, etc. which would have left us homeless and broke. During the foreclosure process, we were misled, harassed, and legally/financially threatened by US Bank’s representatives. (I posted all the documentation in chronological order on my blog financialdocuments.com). In the end we stayed in our place for ten months and the bank lost $160K thru a sold out junior. If they had treated us better and worked with us, we may have stayed and paid what we could until we got back on our feet. Now I’m against all banks and I’m spreading the word to those who have non-recourse loans to get out and save your cash. The bank made enough money working with Wall St. Now it time for them to feel as much pain as the homeowners who made all their payments on time, had 30yr fixed loans, and well paying jobs. I think significant financial crimes need to be met with capital punishment and I’m not alone in this opinion.

  32. I agree with you except for capital punishment. Supplemental Directive 09-09, HAMP and HAFA, was a waste of paper. It had no teeth in it, so the banks borrowed $ from the Fed at zero interest for the hope by Hank Paulson that they would put it back into residential loans. Of course it didn’t happen. One of the problems was that the banks sent all your paper work to India for printing. Of course, it was lost in the process. Then you had to deal with incompetent negotiators. And of course, the servicer bank had to get the approval of the investor(s). Keep in mind that U.S. Bank may not have been the investor, and yet they continue to be paid while it drags on. In other words, U.S. Bank may not have lost the $160K. And this is just the tip of the iceberg. You will probably never know why you were treated so shabilly. Keep in mind that the country needs for you to buy another home in the future. So there is hope. However, there will be a lot of political posturing on both sides of the aisle before that happens. Finally, you may be aware that the Attorney General has not prosecuted anyone criminally for this…and they never will.

  33. I’m offended by your shortsighted article. You have selected two obvious abusers on which to build an article.

    The abusers make up a small percentage of this housing crisis. The majority of the people that have or are losing their houses were not abusers. They were hard working Americans that were exercising the only options presented to them so they could own a home.

    For a good article, dig down deeper into the cause and effect of the collusion by investors, RE Agents/Brokers, and the Banks. Discuss what drove the crisis, not what a few abusers did to get away with theft.

    • The buyers that are losing or about to lose their home are in this situation for one reason, one reason only! They are unable to pay for what the bought. In the begining they thought they could pay for it. Life circumstances have changed and now the can’t. I’ve looked for “when life circumstances changes” clauses in a lot of mortgage contracts and can’t find it. They have no RIGHT to stay in the property that they are not paying for.

      • Classic “blame the victim.” You are missing the effects of the balance of power in a residential real estate situation, and so you focus on the victims as the abusers, instead of those with the power to set up the situation in the first place, as well as the power to change the terms when the situation changes. And modifications existed before HAMP and HAFA – because circumstances DO change.

        You also forget that in many states, foreclosures come with recourse clauses – so the pretender lenders AND the real owner with standing can both come after the former homeowner for balances long after the sale. Double jeopardy is supposed to be illegal, except in real estate it is common.

        Sad to see such lack of compassion on the part of lenders/servicers – and on your part. It’s what is making the US such a mean place to live in.

  34. JG, as you can see, the article by Michelle generated a ton of diverse opinions, including yours. I believe that was the intended purpose. To attempt to address all the issues with all the players would be counter productive and confusing. That was left up to people like you and me. This mess will provoke emotions long after you and I are gone. We can’t unring the bell. We’re stuck with it. We still have to deal conditions in Europe as well as our own propblems of printing money to cover over spending. Unfortunately this isn’t a problem of a few people “gaming” the system. Some day we understand everything that has occurred. Prepare your grandchildren.

  35. I am in litigation now against my mortgage bank. After having a heart attack in 2004, I reached agreement on a forbearance with them, which they then proceeded to ignore and send my house (with over three hundred thousand dollars of equity) to foreclosure sale while I was recovering; I was forced to file bankruptcy. I came out of the bankruptcy in 2007 and brought my note current, and found refinancing on my house, only to have them report me as “currently in foreclosure and over 120 days past due”, both completely false, but causing me to lose my refinancing. I then sold my house; the bank refused to provide payoff information to either myself or the title company; this happened three times, and I lost all three sales. I filed suit and won my house free and clear; then the bank “sold” my free and clear home to themselves at a foreclosure sale that did not meet the notice requirements, and they since have tied up my title. As I am self employed, they screwed up my credit and blocked me from using the equity in my home to fund my construction business, basically shutting down my business. Since then they have sued me multiple times in three different courts in an attempt to force me to give up, which I refuse to do.

    Don’t let anyone tell you the banks are not at fault. They have basically destroyed the last six years of my life.

    Read the full story at:

    http://www.cajunkingkong.blogspot.com

    The bank cannot produce ownership of the chain of title to my house, cannot produce the note which is signed in blank, and can show no proof that they took the note from the original bank I financed with back in 1997.

    All I want is to go to trial in front of a jury. The bank is blocking that with every means possible.

    • I think you make the case for the argument that people should take personal responsibility. You live in a free country and I assume you’re over 21 years old. I’m going out on a limb here, I assume the appraisal was done before you agreed to the loan. Second leap of faith, the appraisal was written in English. Here’s where I may be wrong, you did read the appraisal? Bought the house anyway? Let me guess your Realtor was a relative?

  36. Based on the brief summary you presented, I am shocked that Chase would expose itself to punitive damages. I do not dispute your story. However, when I have had problems negotiating short sales, I emailed the CEO, Jamie Dimon (j.dimon@chase.com) received immediate response, and was satisfied that Chase was not unreasonable. I am sure that something happened to cause it to slip between the cracks. For sure they are getting poor legal advice.

    • Two of the arguments they have used against me in their filings are:

      1. They are not required to provide payoff information if they choose not to do so

      and

      2. They are not required to deal in good faith if they choose not to do so.

      Both of these are part of their legal pleadings to the courts. The arrogance of Chase is utterly amazing.

    • Bullcrappy. I thought he had Bank of America from the description. THEY DO IT ON PURPOSE. All of them. (And gee, that name Dimon sounds familiar for some recent event in the news, wasn’t he?)

      I had excellent credit (around 780-810 FICOs) but in 2005 Countrywide steered me into a no doc loan because I was recently divorced and wouldn’t have to disclose prior taxes, blah blah. He fiddled some figures on he app after I’d signed. I closed in late Jan. 2006, with 6.75% fixed interest (learned later it should have been at least .5% lower, if not more, gee wonder who got that spread…), paid 50% down (and later learned I had overpaid by about $30-$40k on a $165k house, but CW appraisers brought it in at full value), had money in savings, was working, and had to carry my house in AZ for 6 months until it sold – and I was arm-twisted into carrying back interest-only 3-year second mortgage and paying a chunk of buyers’ closing costs, and not advised of risk, and never did see the credit report, just heard, oh some medical problems… fraud from the start?

      So I get a series of hits to my head, ER wouldn’t scan after first (biggest) hit, sent me home. Was not ok, post-concussion syndrome, huge cognitive problems, nerve damage, like having Alzheimer’s for a couple years, finally went to neuropsychologist for testing, who said yes, brain damage… and my psychiatrist then put me on some Alz. drugs which are neuroprotective in brain injury, but this was after I had finally sold the AZ house and took that deal with scrambled brains and conversations by phone and fax at a very long distance. I had to quit my online university teaching job and then couldn’t get unemployment benes because university told them something idiotic about rejecting a teaching assignment, and then couldn’t get the job back a couple terms later when I was closer to normal. Went on disability,basically added the new MTBIs to the old application, monthly payments about what I had earned in take-home weekly before all this.

      Tried to lower my payments in 2008 by refinancing, but Countrywide took forever and the underwriters kept asking the same questions over and over and the loan officer kept diddling with fees and interest rates and didn’t send revised HUD Truth in Lending form, and I ended up cancelling at closing because they wanted an extra $1300 up front for escrow because it was too close to payment time. Gee whose fault is that? Wanted me to finance it to the loan. No I wouldn’t, counter to the whole point of the refi.

      That was spring through summer 2008. July 2008, AZ buyers bounced a payment. They caught up, then stopped paying, basically disappeared. Title company servicing the note had no phone number for them; I sent email which didn’t bounce but wasn’t answered. That’s when I learned the full bad news of the terms of their primary mortgage (One West Mortgage) – 9.99% (which I knew) ARM – and only adjustable upwards! Couldn’t buy it back through foreclosure with that loan on it and my house here in KY. So I sat on it to see what would happen.

      And that fall of 2008, I tried to get help on my own mortgage, to head off problems I could see coming. What a joke. Yes, no, yes, no, get behind to get help, oh no, you don’t qualify after all, caught up on payments, scheduled voluntary real estate and personal property auction, gee you do qualify – paperwork started, canceled auction and drew ire of auctioneer, then- oh gee, we never put that paperwork through, oh we’ll run the numbers again, yes, no, yes, no. Groveled and rescheduled the auction, shouldn’t have done it, lost a pile of money on personal property because auctioneer was still angry and basically gave it away, and house didn’t meet payoff; a well-known local investor thought he’d get it for half price then flip it, no way, by then I had not only half down, but had put in another $20-$30k in renovations and repairs on the 1897 brick house (which before closing the overpriced home inspectors did an incompetent job on, but I had no way of knowing that because I was back in AZ and the realtor didn’t go to the inspection for me, and the seller lied on the disclosure form, and my realtor basically did nothing I couldn’t have done myself, gave me misleading information about pricing, and didn’t follow up on pre-closing walk-through issues. And an incompetent attorney a year later…).

      In the meantime, March 2009, I got Notice of Intent to Accelerate. Huh? I wasn’t that far behind and they’d told me to get behind to get help, then all the flip-flopping when I paid the past-due, then I told them I wouldn’t pay if they wouldn’t play and would pay off house after the auction. (We are talking to Bank of America by this time.)

      I made 2 months’ payments and without bothering to tell me, they rejected them and foreclosed. Their own “home retention” person taking the payment said it would take me out of default. Guess the foreclosure team had a different accounting record! Actually, they didn’t credit the catch-up and regular payments properly, saying I owed a month more than I did. I made a jillion phone calls and finally got it dismissed out of court, each side to bear its own costs. It was still showing as in foreclosure status about a month later, and they billed me for all the foreclosure costs as if it had happened. Another jillion phone calls and that was mostly reversed out. And a return-of-breast-cancer, nodes-on- lung x-ray scare, all kinds of testing during this period, brought on by the stress of trying to deal with BofA and the auction.

      I had tried getting the HAMP modification application as soon as it was announced, and got the familiar misinformation and runarounds as to why they couldn’t send me an application. I finally wrote to OCC and the KY AG’s office. Then BofA sent the application (late July 2009) with Trial Period to start Sept. 1. I paid on time, they sent Final Modification a month late (with no signed Trial Period Agreement as they were supposed to have included with the Final Modification). They sent a Special Forbearance Agreement partway into Trial Period, which went into effect without me returning the agreement. When I looked at the mod “offer” documents, the capitalized amount seemed large, so I asked about it. Surprise, there were those foreclosure-related fees, capitalized back in! They didn’t have a copy of the dismissal their own attorneys had filed, so I sent them one. Asked to have the mod documents redone without those fees, and with a reasonably detailed itemization of capitalized amounts.

      Took 4 months to get another “offer” which had capitalized costs that looked about the same as before, and then 3 more months to get a 3-line emailed breakout of capitalized costs. I kept making Trial Period-level payments, which they credited to my principal & interest when they felt like it, weeks to months after a full original payment was in the suspense account. Lots of verbal bullying from the “negotiator,” lies to OCC and the KY AG from BoA in followup to letters sent about their handling of my account. I asked a bunch of questions about the second mod version because it was out of date by the time they got me the itemization. They considered that a rejection of offer, even though I said I’d sign when I got some answers.

      Several weeks later, I got a wake-up collection call. They had kicked me out of the HAMP program for rejecting 2 offers, doesn’t matter that the first “offer” shouldn’t count as a rejection because they added fees in illegally, and that I had asked for a revision. No appeal. OK, yes, we can accept appeal. Got a call from the “negotiator” who said there was no point in appealing because the outcome would be the same, and he would send the letter of withdrawal from the program. He send me a different excuse in the handwritten version than he sent OCC. Sent appeal anyhow, which sat unassigned for several months, then vanished from the system. In the next 6 months or so, they made multiple secret reviews/re-reviews, each time saying I was not eligible because I couldn’t make the revised payments. (The ones I had been making for the past year? Turns out they were based on the original payments and a proprietary modification. Duh, here we go again, I can’t make those payments!)

      I kept making payments and escalated through Freddie Mac and HAMP Admin. Lots of smoke and mirrors, BofA assigned serial Executive Customer Advocates (ECAs) in Office of CEO & Prez, each of whom disappeared and was replaced when they started digging around asking hard questions. Freddie Mac assigned someone to work with her counterpart in BofA to see about getting me a new modification with only updated financials, an effective date close to when it originally was supposed to have occurred, no new Trial Period. She disappeared after several months, I didn’t get the modification. I did get my emails to and from an Advocate (in Exec. Office of CEO & Prez) intercepted and vetted by the “negotiator” (in Risk Management) until I sent email about it to a few dozen people in BofA.

      Got 2 Notices of Intent to Accelerate in Sept. 2010 after the “withdrawal” and then 1 a month for the next 3 months. The numbers didn’t quite match up and nobody could/would tell me where they came from. I got a “Congratulations, you successfully completed the forbearance, account current” notice that nobody at BofA could find in the system, ditto for the forbearance agreement itself. I sent them a copy of the “account current” notice, so they said it had to be a mistake.

      Other Executive Customer Advocates would send me “responses” to a batch of earlier communications I had sent as Qualified Written Requests under RESPA, and each response took whatever some person sort of remembered or understood to be the issue or that the Advocate read in the file from the last person responding (not actually to anything I sent in), and added some new information but twisted the whole thing into corkscrews and said that resolved issues.

      In the meantime, I kept paying, and they kept reporting me as 180+ days delinquent, and were adding late fees to each on-time payment that they considered “partial” and that were applied to prior past-due payments that had already had late fees applied – cascading fees, illegal but they didn’t care. And once again did some secret reviews, but telling me via the ECA that they were considering a new modification, or telling me nothing at all and then the current Advocate told me it was denied.

      Finally in May 2011, after receiving yet another, and even more twisted and ridiculous, letter about my “issues” from various RESPA letters, emails and faxes, I stopped paying. BofA had refused to do an audit of my account, even when asked in writing by attorneys, and Freddie Mac refused to talk to the agent from HAMP Escalations, saying the account was with the Legal Dept. Then came a Change of Servicer Notice with a phony MBS trust ID with a Freddie Mac prefix, but Freddie said it wasn’t one of their numbers. I sent an objection letter, as described in their notice, requesting contacts, the actual owner of the loan, validation of the debt amount beyond just giving me a number they claimed I owed, etc. Sent it to the address given, Certified Return Receipt mail, got the card back stamped by their mailroom in CA in early August. Didn’t get a response, called the most recent ECA, who didn’t see it in the system, so she went looking for it and took it to Legal Dept. for review. I asked her about some accounting issues, which she said she’d look into. She verified what another Advocate told me, that the account showed the fees had been credited back to me in November 2009, rather than in Feb. or Mar. 2010 as had actually happened, and that all the notes of prior Advocates back to March 2009 were gone from the systems that they can access.

      In Oct. 2011, I got a letter trying to explain when and how they calculated amounts, although promised spreadsheet never arrived, and stating that while the fees were included in the first modification “offer” they had been re-credited earlier, in November. Huh? Bizarro World at its finest. She also said the Legal Dept. said my letter about the Change of Servicer and TILA notice had no legal validity.

      In Nov. 2011, a new Point of Contact called (a collector), wanted me to fill out all those hardship and financial forms again, but the HAMP mod was off the table, and the HAMP rules had changed in October from what they were previously – they had delayed responding responses to some other issues until after the change. I said to send them but we’d been down that road before. He gave me 2 weeks to get them back. I hit my head again, couldn’t manage much of anything for a while. The POC called to find out where my forms were, so I explained about the Post-Concussion Syndrome and the new head hit. He said he’d note it in the file but he had to send the file to the Foreclosure Dept. “for review”. I got phone calls and a letter about a new ECA, but never connected, then later got a letter saying a response would be forthcoming.

      I got a flurry of paperwork after that, including a Summons and Claim for a foreclosure, December 12, 2011 – not enough time for notice prior to filing. This time, they claimed in the filing that BofA owned the loan, but they always, up to and beyond that moment, claimed they were the servicer, not the owner. They sent paperwork about pre-foreclosure payoff amounts through January 2012 that included all the same foreclosure-related fees as before, plus an internet charge. They included the same copy of a copy of the Note and Mortgage they had always sent, with some little changes, including an incorrect MIN (MERS) ID number, a note at the bottom of the recorded Legal Description page about an assignment recorded, and a new page with a non-specific assignment from Countrywide via MERS recorded before the 2009 foreclosure filing. Robosigned, and assigned 9 months after Countrywide ceased to exist as a legal entity able to make an assignment. Very odd, since MERS website was showing Freddie Mac as Investor, BofA as servicer, and Freddie Mac’s website showed them as the Investor – making me not eligible for the 49-state AG servicing settlement.County Clerk said they just check recording info, do not verify.

      I was having more strange symptoms and white cell counts and IGG and IGM levels way high. I had to file my Response by Jan. 2, and in the meantime, was sent to a hematologist who decided to send me to a neuro specialist for further testing. There were also a couple major holidays in that period, so I asked the attorney for extension. She agreed to an extra 10 days. I filed counterclaims with my response. They entered notice that another (KY-based) law firm was added as co-counsel. They went to court and got a 60-day expansion of time to respond to my response (I didn’t go because I was very knocked back by my whatever) – and then the Friday it was due, I got a call from a third law firm asking for an extra week, another co-counsel added to the mix, which hadn’t yet given notice to the court, against me doing this Pro Se. I gave her until Monday. They mailed it at the end of Friday.

      The response they filed didn’t need any extra 60 days – they used that time to get their third firm line up, because the “Response” was totally nonresponsive and at the end pleaded for judgment of foreclosure with them to go ahead and foreclose and receive all costs and me to receive nothing. (They have not filed the actual motion to do so as of late June 2012.)

      In the meantime, BofA gets to keep on adding interest & fees to the amount I dispute – and again, the filing is off by a month on owed-back-to date because of how BofA didn’t credit payments on time, and fiddled with the account history. In the meantime, in my early 60s, I had received a diagnosis of Multiple Sclerosis, retroactive to pre-2002 based on MRIs from that time, and with symptoms that got significantly worse over the previous 8-9 months of dealing with BofA. On top of a long list of other disorders I have, which BofA knew of from my hardship letters. It gets harder and harder to keep track of all the details the longer it goes on, and they purposely drag it out.

      They all do it. They don’t worry about fines and fees or jail time, because the regulators and the Congress are in their pockets. There have been many enforcement actions by OCC, Treasury, FTC and Justice Depts. against the TBTF banks that they have just ignored. The latest settlement is a sneeze to them in terms of relative amount to profits made on doing these things, most people who receive foreclosure notices just give up, and especially since more and more people can’t afford the attorney fees they require to be paid as a retainer and/or as hourly billing, just to take the case and defend against the foreclosure, even if there are no counterclaims.

      Courts are starting to notice the number of people fighting the lenders Pro Se, and are paying more attention to what they are saying. It has taken years to get the courts to listen, rather than just presume everything in the foreclosure filing is as it should be and OK it. In the meantime, there is no risk to the lenders and servicers when they act abominably, except through lawsuits from borrowers, which may or may not be successful, and which don’t make a dent in their profits. Simple cost-benefit analysis! Their biggest risk at this point is more class-action lawsuits from investors of their phony securities, like the ones AIG and some pension funds have filed. The stakes are higher there.

      Rotten at the core, rotten at the top. Read the AIG lawsuit filing on Scribd.com, it is highly detailed, descriptions include quotations from depositions and documents examined in a wide range of categories, and names names – at multiple lenders, over multiple years of bad faith actions.

      Who’s to blame? It ain’t me, babe!

      • P.S. The AZ house follow-up is also very enlightening about lender/servicer and borrower intentions. The original lender was One West Mortgage, and the current alleged owner/holder (HSBC as trustee for a One West Mortgage trust) filed for foreclosure and substitute trustee (and Litton Servicing as Attorney In Fact) in fall of 2010; the documents filed were totally phony – robosigned and an out-of-business lender authorizing the assignment of ownership via MERS. By this time the house had supposedly been vacant (abandoned) for 2 years, and had dropped in value some 20-30% from the $196k sales price.

        The buyers were a couple, and the female filed for bankruptcy, no sign of the male. She listed me as a secured creditor on the house, and showed the house still owned as Tenants in Common, although it turns out the husband had left in summer 2008 and they divorced; she showed her address as the abandoned house until March 2009, so apparently she moved back in at some point for several months. Under property value, she indicated her half of the current value of the property, which she put as $70k for her half.

        I couldn’t go to the creditor’s meeting, but sent questions I would have asked had I been able to go; AZ law allows that, I believe. The bankruptcy trustee started to ask the questions, asked a couple she answered, and as soon as she stopped to gather her thoughts on one question, immediately said she didn’t have to answer, gave the list to her attorney and said she should fill them out and send them to me – but didn’t have to. (Gee thanks!)

        I heard nothing for several months, until I received notice that no objections had been received and the Relief from Automatic Stay of Foreclosure was granted. I had not received notice the motion was filed, even though I am on the creditor’s matrix as the other secured party for the house. I learned this mid-week before the foreclosure sale was scheduled for the Yavapai County Courthouse steps on Monday morning. Of course, I couldn’t find an attorney in the Phoenix/Scottsdale or norther AZ areas to stop it at such short notice. So the sale occurred in April of 2011. I was a bit upset at the whole thing, as you can imagine. But it appeared there was nothing I could do.

        Then around the same time BofA was foreclosing on me in this house in KY, I followed some links from MERS and ended up on an REO auction site. There was my former home! It had been listed for even less than she said her half was worth – and I went to the Yavapai County online Recorder’s site and looked up the documents for the sale. They indicated it hadn’t been sold that Monday but was delayed until Friday of that week (I might have found an attorney had I known I had extra time until the sale).

        It was sold to themselves, of course, for $65k. They listed it on the REO auction site at $60k, and had just accepted an offer of $56k when I saw it. That is about what I had in the place, counting equity and interest owed me, plus closing costs and small cash-out amount. How depressing! And since this was within days of when the 49-state Attorney Generals’ settlement with servicers was announced, and I learned it didn’t include Freddie Mac-owned loans so I wouldn’t get any of it for my house in KY, I was ready to explode from bouncing around in anger, despair and general freak-out.

        I was referred to an AZ attorney to see if I had a case against the bankruptcy court and trustee, for the questions thing and for allowing it to proceed to foreclosure sale with me not given notice of the Relief Motion being entered, and to see if I had a case against HSBC and Litton Servicing, for a number of possible issues, including fraud, lack of standing, etc., for damages and possibly to get the house back as the last person with clear title to the property (and a payoff notice recorded with the County).

        The attorney asked a bankruptcy specialist about that part, and said it would be hard to get that battle fought, but he looked carefully at the package of documents I sent him about the sale and afterwards, including copies of all recorded documents, the note they signed, my agreement with the title company for closing (they picked it) and for servicing my loan, title insurance, etc., as well as annotated list (with links) for various relevant cases. He decided I probably did have a case, and that it would be an interesting case to work on, but it would drag on and require a lot of work and he was a solo practitioner and so couldn’t take it without a chunk of retainer, which I couldn’t pay, as he knew.

        It is obvious HSBC isn’t the real owner/trustee and doesn’t have standing to foreclose on a trust except in behalf of investors. I was surprised they took her figure of half of value to be value for the house in total – an indication (to me, at least) that they didn’t hold the loan and Litton Servicing wasn’t servicing the note, or the value would have been somewhat higher, even with a 30-40% drop in value from $196k and a loan outstanding that was around $156k. It is likely an investor bought the house, a funky little concrete block house on a weedy lot in a semi-rural hillside area of Prescott with a view of a lovely empty hillside that is to remain empty.

        I would have no qualms about filing something and having the investor evicted, and going after HSBC and Litton for damages and title to the house, but I cannot imagine having to do this Pro Se on two properties in far-apart states! I’d file for a judgment against the male buyer (ex-husband of bankrupt female) but I know that he has multiple good-sized IRS liens against him, so I’d be way down the list for payment if he liquidated his assets; I don’t know if he even knew of the whole foreclosure action, or if he filed for bankruptcy since I last looked into things.

        There are questions of fraud from the beginning, in retrospect; the loan they had reset after 2 years, but was only adjustable upwards, so it is possible they planned to leave then from the beginning. It is possible their real estate agent was in on it, at least saying they should be able to refi easily then, take the loan, and oops, forgot to send the seller the credit report and a loan report/statement before closing. Both realtors were negligent in not sending things they were supposed to at and prior to closing – but I was too befuddled to keep track of it then (trusting my realtor there, silly me!) and signed off on it at closing.

        The title company was negligent in not requiring those items shown in the sales contract, same as the realtor items, plus an insurance thing, but I don’t know if whatever I signed at closing makes them untouchable. As servicer, they were lax in not having working phone numbers for the buyers, not checking on the property in person after the buyers missed another month, and in not doing anything to protect my interests during the foreclosure action except to let me know it was happening; I don’t know if I could make a case that based on our agreement for servicing, they needed to have been my eyes, ears and mouth in bankruptcy court or not.

        And just like that, $60k down the tubes, stupidity is not my usual way of behaving, but I was under the untreated effects of brain damage (MTBIs, see posting above), and so things slipped and I suffer and will continue to suffer. That was a large chunk of my life savings/divorce settlement/inheritance. I could be a bag lady in the near future, one with a pickup and two cats.

        So whose fault is it, this meltdown? I am gullible now, never was before, but still…

  37. Basically they can sabatouge the sale of your home. It doesn’t compute. I’m in over my head. They must be relying on some technical reason. Have any of the local news media dug into this? And what do your attorneys think?

    • I’m in the Houston area, and cannot get a response from the media; I have tried. I no longer have my attorneys, as I cannot afford to continue to fight suits in three different courts in three different cases, and am having to work pro se right now. They did sabotage my sales; I have a buyer who will buy it tomorrow if I can get the title clear, but Chase is attempting to take it by ignoring the judgment I have against them giving me title and pursuing the foreclosure sale efforts, even though I owed them nothing at the time.

      The technical reason is that I have a home worth $600,000.

    • They are overwhelmed, and by charter have strict limits on household income and what kinds of cases they can accept.

  38. Kevin Smith says:

    A very refreshing article. I always get these confused looks when I start ranting and raving about those predatory homeowners. I rarely find a person who will say-I borrowed a lot of cash on my home, bought a lot of stuff I just didn’t need, and now I am going to cheat the bank out of what I owe them.
    Maybe it is the fault of that George Bush fellow because no one i meet seems to feel it is their fault.

  39. I couldn’t have said it better. I’m an REO agent and see the home owner has over spent 90% of the time. Now they want the banks to pay for all the access they spent, new kitchens, boats, RVs, and the like. They used their house like an ATM

  40. What kills me is the attitude of the most irresponsible people, i.e. house = ATM, toward the banks and society in general, like they have no responsibility in the matter whatsoever.

  41. Foreclosure is not a option, refinance can be trick, But you aways can avoid lose your home, You can rent it and wait till the market pick up and sale. The problem is the condominium law make it not easy with several restriction for people rent they homes.

  42. Cybill Garbo says:

    i couldnt agree more with you about principle balance reductions, those should be strictly limited to amounts used to purchase a home. unlike for other expensive possessions, a house/home is a necessity this was explained to me first by an arizona personal injury lawyer wayback in 2009.

  43. I assume that everybody knows the BofA is now FORGIVING second mortgages! A friend of mine in N CA called me last week and said she got a letter in the mail from BofA, forgiving her $80,000 second. She never asked for it and wasn’t in trouble. I can remember when they just gave away toasters

  44. And I asked them just to forgive the so-called past due amounts for principle & interest and the junky fees and cascading late fees they added, maybe $15,000 total when I asked them. Hahahahahaha. And I needed it, so of course now they give forgiveness to people who don’t need it, didn’t ask for it and they were paying people up top $30,000 to move out with a short sale last year. Can’t do that either, since I owe them less than I have in it, and they won’t do anything for me except foreclose for the 2nd time.

    Any chance I could get a copy of the letter BofA sent your friend? Might be really helpful to me handling my case pro se against BofA’s 3 different law firms and a judge who doesn’t seem to take me seriously and thinks highly of BofA. (see above) Are they just the servicer or do they actually own her second mortgage? And was it just an offer she had to follow up on, or was it an actual statement of forgiveness of the second and recorded in the county recorder’s office?

    Sigh… she must be a realtor or real estate investor. Wells Fargo was forgiving loans for realtors and investors a year or two ago, people who didn’t ask for them, while us peons couldn’t get them to stop charging for drive-by inspections they didn’t actually do!

  45. Its like you read my mind! You seem to know a lot about this,
    like you wrote the book in it or something. I think that you can do
    with some pics to drive the message home a little bit, but instead of that, this is fantastic blog.

    A great read. I will definitely be back.

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