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The You Generation
January 29, 2008 12:47 PM   Subscribe

Is foreclosure right for you? Walking, a click away.
posted by wallstreet1929 (32 comments total) 7 users marked this as a favorite

 
Jingle mail, jingle mail, jingle all the way....
posted by Tacos Are Pretty Great at 12:52 PM on January 29, 2008 [1 favorite]


As a commenter on Calculated Risk recently opined, the borrower is the LAST person to "walk" in this train-wreck.

The first to walk were the Federal regulators, ca. 2002 when they decided the "Ownership Society" was a winning strategem to avoid the nation falling into continued recession going into the 2004 elections.

The next to walk were the major banks, who saw they could start selling through their loan products -- and concomitant risk -- to Wall Street.

Wall Street started walking when they saw that overseas markets were dumb money willing to buy any debt instrument with yield.

The loan brokers, facilitated by the warehouse lenders providing them their working capital, were next to get into this crooked game by putting literally anyone -- including part-time strawberry pickers -- into any loan that made them commissions and those sweet, sweet YSPs.

Appraisers, ratings agencies, the Fed, all started pocketing the easy money and walking on their long-term obligations and reputations.

Then the music stopped, and here we are.

/s/ a JBR in Silicon Valley
posted by panamax at 1:03 PM on January 29, 2008 [6 favorites]


I love the smiles on these people who have lost their house and (presumably) thousands in payments.
posted by QuietDesperation at 1:05 PM on January 29, 2008



I love the smiles on these people who have lost their house and (presumably) thousands in payments.

Eponysterical!
posted by ShawnStruck at 1:07 PM on January 29, 2008


My (very modest) home is paid off. It is the only house I have ever owned, and I expect to die in it, or, at least owning it. I can't imagine the mindset in which not making payments, and then walking away, is merely a business decision.
posted by Danf at 1:09 PM on January 29, 2008


I just tried to initiate a chat session. Here's the full transcript:

Thanks for contacting us. An operator will be with you shortly...
[Visitor] Hello? Anyone there?
[Visitor] I have some questions about your service.
[Visitor] Operator?
[Visitor] Anyone?
[Visitor] Sorry, but I can't wait much longer. Is someone there?
[Visitor] OK, I have to go. This was not very helpful.
END

posted by brain_drain at 1:10 PM on January 29, 2008 [1 favorite]


I like the first comment---sums up the situation totally. I know a couple that are buying up defaulted homes so they can fix up a bit and then rent them out to the people who need places to live but had to sell their homes.

I guess torching a home for the insurance is considered a non-option? advise.
posted by Postroad at 1:22 PM on January 29, 2008


I can't imagine the mindset in which not making payments, and then walking away, is merely a business decision

I believe when you sign a contract, you should live by the terms of the contract.

Contracts should not be suicide pacts, however.

The reason why housing prices ros so much 2004-2006 was that lending practices have pushed "affordability" past the limits. "Stated income" liar loans to get around DTI guidelines. Negative-amortization to make the first 2-4 years more affordable.

Land is in fixed supply, and demand for it is immense, so the net effect of making acquiring land temporarily more affordable for everyone is to actually make it less affordable in the end. 2004-2006 was an upper division economics class in Market Failure.

Thousands and thousands of borrowers walking away and living with the consequences will in fact result in stricter, saner lending standards and thus greater affordability in the future. At least until the next batch of Republican looting bastards gain control of the levers of power again.
posted by panamax at 1:24 PM on January 29, 2008


I guess torching a home for the insurance is considered a non-option

Insurance will, best case, cover the replacement cost of the structure. Unfortunately, the borrower's purchase went mostly toward purported bubble-era land valuations, which means the borrower will still be underwater, and homeless to boot.
posted by panamax at 1:26 PM on January 29, 2008


I guess torching a home for the insurance is considered a non-option? advise

Other than the whole "arson" and "insurance fraud" aspect, I'm sure that would be fine.
posted by dersins at 1:28 PM on January 29, 2008 [1 favorite]


The You Generation

Pepsi - Generation Next
posted by Pollomacho at 1:29 PM on January 29, 2008


In other news, Countrywide just reported a $422-million loss for the 4th quarter, following a $1.2-billion 3rd quarter loss.

Obviously we've turned the corner and good times are just ahead.
posted by Thorzdad at 1:34 PM on January 29, 2008


QuietDesperation: Sure, they may have paid much more than they would have via renting, but when you consider that a lot of recent vintage loans were 0-5% down, it would be much easier for them to be happy than it would be for someone who made a downpayment of 20%+ of money that they'd saved up. Heck, when you consider that they might have rolled a bunch of credit card debt into a refi, they might have come out ahead if they were far enough behind when they started.
posted by nobeagle at 1:35 PM on January 29, 2008


Well, there's a vicious class warrior in me who wants to see the bankers, and banks, who put out those preditory loans lose every cent. But the more rational side of me knows that the economy wouldn't survive if we just let the banks that did this twist in the wind.

Which sucks massively, because the villians responsible for this mess will not only escape unpunished, they'll get out with billions in stock options, golden parachutes, and salary.

The only people who will hurt at all will be the victims of the preditory loans, and us middle and lower class taxpayers who will get stuck with the bill. The elites of society, for whom taxation is voluntary, won't pay squat.
posted by sotonohito at 1:36 PM on January 29, 2008 [7 favorites]


I love the smiles on these people who have lost their house and (presumably) thousands in payments.

I like the pictures of the families in the park, posing and playing in their new home.
posted by infinitewindow at 1:43 PM on January 29, 2008 [3 favorites]


Another opinion on walking away as a change in social attitude. It will be interesting to see how widespread, if at all, this phenomenon becomes.
posted by preparat at 1:58 PM on January 29, 2008 [2 favorites]


Walking away . . . here's the signing ceremony where DC gave the green light to all FBs.
posted by panamax at 2:05 PM on January 29, 2008


See, it's like this. For decades, we were told that owning a home was important. But the last few years, we were told this was dumb.

You didn't "own" a home. That was stupid. That tied up equity, which was stupid. Debt was good. Equitiy was bad. So, we were told to stop treating our homes as homes, and start treating them as investments. And the best thing to invest? Debt, also known as "somebody else's money."

So, people did just that. They were told to act as investors, not as homeowners, and that's exactly what they did.

Guess what? That's exactly what they're doing now.

A homeowner wants to save their house.

An investor? They're not throwing good money after bad.

As you've sown, so shall you reap.
posted by eriko at 2:11 PM on January 29, 2008 [8 favorites]


Where i Browny and the FEMA trailers now that we need both?
posted by Postroad at 3:31 PM on January 29, 2008


It goes further than that though, eriko. Over the last two decades real estate transactions moved away from being lender-homeowner relationships, went through being investor-investor relationships, and now in many cases seem to be more scammer-victim relationships and scammer-scammer relationships. Under such conditions it makes a lot of sense that home buyers will not only do whatever they can to minimize their own costs, but also to actually maximize the bank's costs as much as they can.
posted by aeschenkarnos at 3:42 PM on January 29, 2008


If you bought a house in the bubble, I have a secret bit of knowledge for you!

Here it comes!

...

You were dumb.
posted by blacklite at 3:47 PM on January 29, 2008 [1 favorite]


However, I think walking away is much less dumb than buying the house in the first place, and I support the decision of people who choose to do it. You have no moral obligation to Countrywide.
posted by blacklite at 3:49 PM on January 29, 2008


Fortunately, the bamboozlers-in-chief of the lending meltdown are getting what they deserve... or not. Thank goodness them billionaires manage to land on their feet.
posted by Emperor SnooKloze at 5:04 PM on January 29, 2008


A beautiful model for load fraud.
posted by telstar at 5:11 PM on January 29, 2008


I love the "Do you qualify" link, which is actually a call to action page so a Walk Away Evaluations Officer can begin the smooth process of hard selling you into giving them your home.

I do loath a bottom feeder.
posted by mattoxic at 5:55 PM on January 29, 2008


Another opinion on walking away as a change in social attitude. It will be interesting to see how widespread, if at all, this phenomenon becomes.

My partner and I were talking about this over dinner tonight, with respect not only to house purchases but all economic behavior made by individuals:

Kroft observes to real estate agent Kevin Moran. "There was a time, I think, when people felt really bad about not paying off a debt."

"Yeah, I think in those days, loans were made by your local banker or building and loan associations or savings and loan," Moran replies. "They were guys you saw in the grocery store. They were on the little league team with you, the PTA, the school. And I think as mortgages became securitized and Wall Street became involved, they became very transactional and there was no relationship built with the borrower and the lender. And I think that makes it easier for someone to see it as an anonymous party at the other end of the transaction and just walk away from it."

"Just a business decision," Kroft says.

Implicit in this segment is that families are not entitled to make "business decisions." But you know who is entitled? Why, businesses of course. When businesses laid off 1.5 million workers in 2007, it was purely a "business decision." When Wall Street banks "wrote down" more than $100 billion in losses in 2007, it was purely a "business decision."

Look for families to become more comfortable making "business decisions" of their own in 2008.


Our parents would have probably killed themselves before declaring bankruptcy or foreclosing on their house.

Nowadays, leaving aside for a moment the matter of house purchases, we considered music piracy and why it is so widespread, and what the similarities were, if any.

Economies lift themselves up by their own bootstraps. In a sense, music piracy has its own economy. People will outlay money for hard disks, high-speed network connectivity, etc. to illegally copy music they can buy legally from the local music store.

Why is this? We considered that the music industry control over both cost and distribution channels made their product prohibitively expensive — or, rather, that people's valuation of what was value-for-money changed once the cost scale for storage and broadband networking dropped, and the distribution method became too inflexible.

It was then suggested that Fannie Mae and the rest of the mortgage companies were relying on the same psychological model, to some degree, as the music industry: Customers would continue to pay for the product based on the valuation and ethical guidelines set by vendor, and not based on their own valuation. With the economy changing, people's valuations are changing.

Much as the music industry begins to make inroads into repairing their cost and distribution structures, to be able to sell music again, I wonder if the consequences of this bubble will result in mortgage companies changing commonly-held notions of risk, and the types of products they will have to sell, in order to stay in business.

Instead of the buyer (a small family) assuming all the risk in a mortgage, what if the mortgage took upon itself some responsibility for the market conditions in property valuation and rates? For example, by creating mortgage products that take into account the change in the equity the customer is trying to build, as market conditions change?

We also discussed a larger cultural shift in which employees no longer expect to work for one company for life, but instead expect to have their pensions gutted, their benefits lifted, and to be fired the next day, suddenly and for no reason, with no social safety net in place to provide any security for children and spouse.

In a society where you and your family are treated like expendable garbage by Wall Street, as a "business decision", why should only corporations be allowed to make "business decisions" that hurt you? Why shouldn't individuals be allowed to commit the same economic violence done to them on a regular basis?

Larger than foreclosures is the idea of what is the American social contract. It'll be interesting to see how that contract changes, and how America will change with it.
posted by Blazecock Pileon at 7:35 PM on January 29, 2008 [13 favorites]


Instead of the buyer (a small family) assuming all the risk in a mortgage, what if the mortgage took upon itself some responsibility for the market conditions in property valuation and rates? For example, by creating mortgage products that take into account the change in the equity the customer is trying to build, as market conditions change?

The mortgage itself cannot assume any risk, because a mortgage is just a security interest, and a security interest isn't the sort of thing that can bear risk. I assume what you mean is that you want the lender to assume some of the risk that the real estate will lose value, but the short answer is that they already do.

The purpose of a security interest is to assure the repayment of a loan by substituting the risk that the collateral will lose value for a portion of the borrower's credit risk, basically. Anyway, bearing the risk of fluctuations in property's value is part of owning that property. A possessor of property who completely insulated from such risk is called a "renter."

In a society where you and your family are treated like expendable garbage by Wall Street, as a "business decision", why should only corporations be allowed to make "business decisions" that hurt you? Why shouldn't individuals be allowed to commit the same economic violence done to them on a regular basis?

I don't know if I'd describe it as "economic violence," but I agree that anyone should feel free to efficiently breach a purely economic arrangement, and I count employment and borrowing money from strangers as such arrangements.
posted by Mr. President Dr. Steve Elvis America at 8:44 PM on January 29, 2008


Hilarious.

How we help you: 1. We will stop your mortgage company from calling you. They will not be able to hassle you anymore. They won't be able to call you to collect!

Yeah, or you could, you know, go to a credit counselor and get the same thing.

2. You will immediately know the exact amount of days you have to live in your house payment free.

(Last payment date + 30) - today's date. Plus or minus a month or two for the bank to call the sheriff's office and boot you.

3. You will be enrolled in our affiliate credit repair plan. They have removed thousands of foreclosures from their clients credit reports.

Maybe the ones older than 10 years. The only foreclosures they're gonna be removing from credit reports under that term will be with white-out.

4. You get a personal consultation with one of our highly experienced Real Estate Attorneys making sure the lender followed the law perfectly.

See point #1.

5. You will have experienced foreclosure consultants available to answer any questions you may have during the entire process.

See point #1.

6. A money back guarantee and Much More!

Much More? How Much More Can One Person Possibly Take? Does This Also Come With Much Much More? I Saw One Dude That Was Offering Much Much Much More. Will You Match?
posted by Civil_Disobedient at 8:46 PM on January 29, 2008


Yeah, my landlord was one of those that 'walked away', and then ran right straight into Chapter 7 bankruptcy on top of it. I had to deal with Countrywide coming to change the locks on my apartment at 11 in the morning on a weekday (which they didn't due to state law after discovering there were tenants), then a complete asshole of a P.I. showing up around 10:30 at night--on a Friday, no less--to serve us with papers notifying us of the impending foreclosure proceedings.

If it weren't for a stroke of luck thanks to working from home during the day and not going out the night the P.I. showed up, we wouldn't have known any of this was happening and we could have been screwed. The landlord sure as hell wasn't answering his phone, and it took our lawyer to find the bankruptcy trustee after I had to do all the research just to find out what the hell was going on through public records and an off-handed search of the local U.S. District Court's upcoming bankruptcy cases. We're just lucky that the timing worked out just right in that our lease term ends sooner than the maximum occupancy time we would have had under state law, otherwise we would have been out on the street with very little notice.

Too bad there are tens of thousands of other renters out there who are in the same predicament, and many of them have not a clue what's happening. They won't be so lucky.

Fuck the walkers. The worst part is that while the owner doesn't have to pay a fucking dime, we still do. To whom, you might ask? The bankruptcy trustee of the estate bank, who in turn gives it directly to--you guessed it--the lenders.
posted by vanadium at 11:29 PM on January 29, 2008 [2 favorites]


as a business transaction, it could be very smart. here are my thoughts:

1. when you come out of bankruptcy, what are housing prices going to be? are you going to end up in a house paying about as much as you were paying in the first place?

2. 7-10 years from now, if you have kids, will they be needing cars are college paid for? will you have saved that up?

3. are you really going to be saving that much money? renting a house can still be hella expensive so unless you downgrade you're not saving up enough to help you own a house in the future.

regarding the housing market, we're basically becoming a landed class versus working class society here, and telling people to walk away and rent just accelerates that process. it's like they say -- they ain't making any more land.
posted by taumeson at 9:24 AM on January 30, 2008 [1 favorite]


I can't imagine the mindset in which not making payments, and then walking away, is merely a business decision.

I can easily imagine it.

You purchase a home for $900,000, and put 5% down. $45,000.
You make payments for a year, totaling $65,000.
The real estate market crashes so hard that your house is now worth $675k.

Situation 1: You are forced to move.

You can either sell at the new market price and pay the balance of the mortgage ($170,000) out of pocket. Or you can walk away, and apply your money to the purchase of a new home, instead.

Situation 2: You don't have to move and you aren't emotionally attached to the house.

You can either pay $170,000 extra for your house (actually more like $300k+, since you have a mortgage) or you can buy a new house, walk on the first one, and make several hundred thousand dollars in two weeks.

It's not hard to understand. It's just good business.
posted by Tacos Are Pretty Great at 11:22 AM on January 30, 2008 [1 favorite]


I like it! Let the banks who made bad loans eat their stupidity. Plus the bank must sell off the house which adds desperately needed liquidity and helps reduce the price of housing.
posted by jeffburdges at 3:37 AM on February 1, 2008


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