Archive for the ‘Foreclosure Victims’ Category

From trends being noticed since October it seems that Henry M. Paulson’s toxic plan is not going to be of much use for foreclosure victims. The observers are getting inconsistent signals.

Paulson has decided not to buy soured bank assets. This indicates that he has drawn two conclusions regarding the jumbo $700 bailout package.

Firstly it seems he has realized that the plan would not work out properly. Secondly it appears that the financial and economist pundits who were wary about the direct injection of capital into the banking system seems to have been in the right from the very beginning.

Paulson recently announced that the federal government would soon give up the plans of purchasing troubled mortgage-supported securities from the banks and other jumbo investors. It will now concentrate on how to defreeze the credit markets. Only a week after launching the bailout package Paulson has started giving indications that the focus of help had changed. The money would now go to buying preferred shares of the banks to allow for flow of capital. With the replacement of slow IV drip with an adrenaline shot sent direct to the heart, the stock market got a boost for few weeks. The recent announcement is not a surprise but a re-statement of something that has already happened. $60 billion is yet to be spent from the original outlay of $350 billion. So far the purchase of soured assets has not taken off.

This change of course has put USA at par with the measures being taken by Britain and the rest of Europe. Direct re-capitalization of the banks has become the rule here and the response to financial problems.

Concerns are being raised about the inconsistencies of Paulson. The original plan was labeled TARP – Troubled Asset Relief Program. In the maze of all this shifting the humble foreclosure victim is getting lost and forgotten. Campbell R. Harvey of Duke University said, “This was a major piece of legislation. TARP was what people were voting on, and now he announces that TARP is not going to be TARP.” Paulson and also the Congress are now failing to define the goal of TARP. It was targeting the troubled banks in the beginning but now the talk is about both banks and non-banks. The foreclosure issue seems to be lost in a maze of policies.

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More reports are coming in of renters who have been regular in paying their rent and yet they have become innocent victims of foreclosures. Eviction notices have been served on them because of the landlords who have defaulted. Only few days of warning are given.

According to a survey conducted by Mortgage Bankers Association, one out of every five foreclosures relates to borrowers who are not occupants of the mortgaged house. The study also brought into focus that it is the investors who allow loans to run into default rather than those who have bought houses as their first place of residence. The assumption is that the investor, being a businessperson, does not want to “throw good money after bad”. But a person to whom the house is a home will try desperately to cling to it.

There are also instances of first time investors who have purchased many properties during the housing boom period and are now facing foreclosures on all of them. The lenders too charge high rates for these risky borrowers – even more than the sub-prime rates. Realizing the situation many of these investors just walked away leaving the houses and without contending foreclosures. These moves have affected many families whose only fault was to have rented accommodation from landlords who had defaulted.

The Sheriff arrives with a foreclosure notice and forcefully evicts the occupants. Sometimes damages are demanded. Some foreclosure eviction notices hardly allow the tenants ten days notice to shift. The lenders contend that their job is not to be landlords but to make arrangements for immediate sale of the house. Any delay is costly for them. As such the house must be made vacant. The lenders also argue that the borrowers are now getting 90 days time and it is up to them to warn the tenants well ahead of the pending foreclosure.

With tenants abuse increasing the government is trying to bring in a law that will expect the new owner to extend the existing lease on the mortgaged house for another six months. Some states have already started enforcing similar laws. The tenants can now go to the courts and request for time extension.

Some of the lenders are offering financial help to the tenants to shift if they agree to do so quickly. This is known as the ‘cash for keys’ arrangement. The money involved ranges from $500 to $1,500. It is also expected that the house will be vacated in good condition.

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FDIC and the Treasury Department are going full speed ahead to rescue foreclosure victims but it is as yet not year what the preconditions are for qualification. Ultimately the question hangs in the air that even after all these rescue operations will even a dent be made in the foreclosure mess?

The plan includes government guarantee of the house mortgages. From the $700 billion chalked out for the rescue package, $50 billion will be set aside for this purpose of government guarantees that will cover 3 million mortgages that are threatened by foreclosures. Low interest loans will be offered for a five years. The risk will be that of the government if within that time the value of the mortgage is not recovered.

Sheila Bair, the chairperson of FDIC discussed the plan on 29th October at a conference in Arlington. She did not give any details. She said that what has been developed is “a federal program to help more borrowers avoid foreclosure. …Such a framework is needed to modify loans on a scale large enough to have a major impact.” She added that talks with the Treasury were still going on and that by October 30th the proposal would be disclosed.

However, Jennifer Zuccarelli of the Treasury Department said that this is not totally correct. She said, “We are looking at a number of proposals on foreclosure prevention, but not one proposal has been decided upon.” There could well be friction between the two entities that would require ironing out.

Mandatory relief plan would be the boldest and most effective the government could take to give relief to the foreclosure victims. Six months previously Bair had suggested similar plans but it was hardly given a passing thought. So far the Bush administration has been focusing on voluntary cooperation from the lenders to avoid foreclosures. Critics allege that the 5-year plan backed by $50 billion is not adequate enough even to scratch the surface of the crisis. They want the loans to be modified by the lenders taking into account the repaying ability of the lenders. This loan would be backed by the government so that the lenders did not have to undertake any risk. If the plan were stretched beyond five years then the lenders would have to make too great sacrifices. The conditions of the loans would be related not only to the income of the borrower but the correct valuation of the mortgaged house.

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The corridors of power at the White House and the Senate have spent numerous months in experimenting with measures that will contain the foreclosure crisis. But to the ordinary man overwhelmed with loan the very process of trying to get assistance may seem confusing. But there are many options for foreclosure victims.

Last July, a help scheme was launched that was for those who had gone “upside down”. It meant that the value of the house had become less than the amount of the loan due. By the Housing and Economic Recovery Act of 2008 was born the work out plan of Hope for Homeowners. By it the FHA (Federal Housing Agency) provided insurance so has to help foreclosure victims who were in occupancy of their houses qualify for a long term traditional mortgage with lower interest rate. The modified loan would cover 90% of the current appraised value of the house up to a limit of $550,440. The insurance coverage by FHA would make it possible for the borrower to avail of low interest.

The government initiated this three-year plan with a fund of $300 billion. The scheme is voluntary on the part of the lenders who may refuse to alter the terms of the previous mortgage. There are a good number of lenders who want to modify the loan and thus avoid the hassle of foreclosure. There is also a fear that too much stubbornness might cause the Congress to come down ever more harshly on the lenders.

Hope for Homeowners are for those who mortgages have gone underwater, contracted before January 2008 and have a monthly payment responsibility that is more than 331% of their earnings.

Borrowers should also try their level best to contact respective lenders. However it will be wrong to entertain high hopes about immediate assistance. The programme has only recently been launched and many lenders are still mulling over the process.

On 1st December Countrywide (now under Bank of America) is planning to introduce a “home retention” comprehensive plan to steer foreclosure victims towards Hope for Homeowners rescue scheme or any other similar programme. Those who are in default for over 60 days are advised to call up the lender and open communications for workouts. From 1st December they will be able to move on a fast track regarding new loans.
Filing of bankruptcy will not help in saving the house until the bankruptcy judges are allocated the power to relax the mortgage terms. This is a bone of contention between the two political parties.

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Foreclosures have claimed another victim. A woman sets fire to her house and then killed herself.

According to police reports, Wanda Dunn, 53, in a planned way packed her bags on the night prior to her death. She left them on the front doorsteps of her neighbour together with instructions about what they should do with the stuff. After that she went to her house in Pasadena that belonged to her grandparents. Then she set it on fire before shooting herself.

Alicia Suarez is a homeless woman who sometimes used to seek shelter in garage of Dunn’s house. Alicia says that it is foreclosure that forced Wanda to take this extreme step. Alicia added, “She was very good friend of mine. Let her rest in peace.”

The friends and neighbours of Wanda said that in all probability this unnatural death was due to foreclosure related financial problems. A revolver was found next to her body. Lt. John Dewar of Pasadena police commented, “It’s very, very sad case, especially in these economic times.”

The last few weeks have been the worst with tumbling real estate prices, economic gloom and increase in foreclosures especially in California. Foreclosures have undoubtedly taken a toll of the mental health of the sufferers. Clinical psychologist Gaithri Fernand of Los Angeles said that people commit suicide when they do not have any hope about help and assistance. In other words they have lost all faith in the world and in themselves. “Helplessness in the face of bad things leads to hopelessness, which leads to suicidal behaviour” she added.

The neighbours were the first ones to see smoke gushing out of Wanda’s house in 1000 block, North Wilson Avenue in the wee hours before 5 am last Monday. Scott Hardin, a neighbour contacted the fire department. Minutes later the fire fighting team arrived but by that time the building was charred and ash was blowing in the wind.

The neighbours recalled Wanda as being ‘pretty’ and ‘reclusive.’ Hardin and Dunn would sometimes exchange greetings with a wave of the hand but they never really chatted. Williard Pugh was another neighbour – one of the few who were considered by Wanda to be a friend. He said, “You could tell that she was very pretty, but she never got dressed up.” Others neighbours too said that Wanda would often wave but she was never close to anybody. Most probably foreclosure eviction notice had made her lose her mental balance.

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Jacqueline Scott is one of the many who have benefited from Hope America. This Ypsilanti based agency spells hope for many foreclosure victims. In 2006 Scott came to know that the unit where she was working would soon shut down. She promptly contacted her mortgage lender apprising the lending firm of her dilemma but they said that until she fell back three months in a row they could do nothing. Scott somehow pulled along with her mortgage payments for a year even after loss of her job. However she could not find another job during this time. Slowly she began to lag behind but little help came from the lenders – especially since it was sold to another bigger company. Finally she managed to get a job at less pay. But that did not convince the lenders that she would be able to carry on with the mortgage even with the help of her live-in fiancé. Scott bemoaned, “It’s almost like they set the system up for you to fail.”

The redemption period of Scott was scheduled to expire on 1st May 2008. In the beginning of the year she came to hear about Hope America a non-profit group based in Ypsilanti that lends a helping hand to those in trouble in Washtenaw County. The help covered a wide range – food, financial advice as well as foreclosure prevention. Hitherto Scott had gone through all the routine of filling up forms and processing the appeal on her own but it had come to naught. But when Hope America stepped in, suddenly the lenders were willing to talk.

Hope America debuted in 2005 and relies entirely on donations. It is a small body with two staff members, a Board of Directors and about 80 volunteers according to the Eleanor Walker, the Executive Director. Hope America organizes financial workshops and distributes food and clothing four times a year. Till 2007 in Washtenaw County 5,700 have benefited from their activities.

In December 2007 the foreclosure issue was included in their itinerary. This was in response to a rising number of foreclosures in the area surrounding Michigan. It offers financial advice and foreclosure prevention classes apart from interacting with individuals for specific support. So far about 50 to 75 foreclosure victims have been helped. They have avoided foreclosure by negotiations with lenders conducted by Hope America on their behalf. Few have lost out but that was because they sought help too late.

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Foreclosure rescue companies are duping victims with teasing signboards promising purchase of house with cash or refinancing the loan with the bonus of a 7 day vacation! They take a fee ranging from $1,000 to $2,500 promising the sky.

The line of approach is the same everywhere with variations from one case to another. The scammers promise to open communication lines with the lenders and arbitrate as regards terms. The most dangerous is the deeding of the house to a third party assuring the borrowers that apparently they will get a breather to get back on their feet. Unfortunately in nine cases out of ten the medicines have proved to be more dangerous than the disease itself. On the one hand foreclosures gallop ahead and on the other following its trail are the vultures – the scammers. It has become a thriving business.

Many states have taken the lead in helping the borrowers to be warned of these dangerous elements. So far 18 states have taken legal measures to prevent foreclosure rescue scams by hemming in the practice with regulations. Six states – Idaho, Maine, Nebraska, Oregon, Virginia as well as Washington enacted the law this year. Florida is set to pass a similar law. The National Conference of State Legislators released this information.

The steps taken will allow the house owners few days time to cancel contracts made with these dubious companies without incurring any penalty. If the house is sold then 80% to 82% of the proceeds has to be given to the original owners. All this will require a written contract. Patricia Lantz (D), Washington State Rep, said that the main purpose is to le let the word circulate that these sort of predators picking the bones of hapless foreclosure victims will not be tolerated. She strongly added, “This is a deterrent to the worst of the worst.”

In 2007 Maryland already had a similar law targeting the scammers but this year in the last session a tougher stand has been taken banning any form of transfer of deed altogether. Washington D.C. and Massachusetts have such strict laws. The Bay State put a full stop permanently on foreclosure rescue scams with an eye to profits through an attorney general’s regulation. Most of the above board foreclosure rescue operations come from non-profit groups and do not normally charge fees. The usual procedure is for house owners seeking them out and not the reverse. On the other hand scammers locate the victims by combing through public records and the like.

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Metro bus driver Eduardo Montesiro was one of the many house owners who crowded in to attend the Watsonville housing symposium held to help foreclosure victims last Saturday. It was organized by credit and mortgage specialists. Attendance was free.

Eduardo somehow slipped through the foreclosure net that trapped about 250 house owners in Santa Cruz County last year. In Watsonville he manages two mortgages. It is a balancing trick as he juggles to keep his income feeding rising payments while looking after his spouse and two children. Unfortunately he feels that by the end of the year he will have to surrender. The future looks bleak.

Eduardo was one of the participants at the workshop that was conducted both in Spanish and English. The aim was to help the borrowers to be realistic about their income-expense ratio and face up to the fact about keeping up with their mortgages.

The Latino families have been the worst affected by the foreclosure tornado raging through California. At the root are the sub-prime adjustable rate mortgages that were peddled to vulnerable borrowers. Today it has hit the general economic health of the region. The Hispanics are at the receiving end especially because of language problems, scant knowledge about mortgage implications and adverse changes in income patterns.

Owning a house is part of the Latino culture. Nobody understands it better than Maria Enomoto a consumer credit counselor. She was one of the prime movers of the workshop. A house translates into success. She has worked with many families ranging from professionals to field workers. She notes that the majority spend all their income battling with mortgage payments – there is very little left over for survival essentials like groceries or gas. So they dig into credit cards – something which cannot be sustained. The agency Enomoto works in, will start a new office in Watsonville office at 240 Westgate, Suite 240. She told the foreclosure victims that the first thing they should do is to be realistic and evaluate their income with their expenses.

On an average the first time Latino buyer is 24 years old , while a white buyer will not indulge in a house until the person is 32. The former does not have any idea about the loan implications and complications. The mortgage company should be contacted for loan modifications but this cannot be done unless the party is able to pull along.

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