Gee...what a shock. As a consumer bankruptcy attorney, I file a fair number of cases to stop foreclosures. In recent months, I have seen a number of people who were working with the mortgage company, only to have their loan mod denied within days of the posted sale. I file their case, and they stay in their home. Mortgage helpline not what is was cracked up to be.
Houston's starting to catch up to the West Coast and FL... As of today: 314 in pre-foreclosure 4,230 being auctioned 10,852 bank-owned Just for grins, here's Dallas: 51 4,386 10,086 and Austin: 3 807 897 and LA: 27,459 7,597 20,163 San Diego: 13,494 3,325 10,628 Miami: 17,875 3,564 5,450 www.realtytrac.com Looking at the other states, you can really see the bubble of ARM's that got reset recently in the pre-foreclosure numbers. And that's probably just the beginning. I don't think you will lack for work over the next few years Ref.
I'm having trouble understanding why there is such a run on foreclosures. I understand the ARM-loans, but given that unemployment really didn't start rising until last month, why did fixed-loans become such a problem? Those people are making the same as they always were and their payments are the same as they always were. But beyond that, banks don't want to foreclose - especially in this environment where they stuck with a house they can't sell. Why don't they work with consumers more to restructure their loans? There are plenty of ways to avoid foreclosure - extend out the loan by 10 more years; lower the rate; turn it into interest-only payments for x years; etc. I recognize none of these promote fiscal health, but all would lower the homeowner's monthly payment and keep them paying - that's better for the bank than foreclosing. Are these options being tried? If not, why not?
Because they aren't better for the bank. The banks, in many cases, would rather cut their losses, and have a loss carryforward on their books to boot. If their other lines of business make up for the mortgage loss, then there is no carryforward, but they get to offset their income. Also, the bank's loss is way overblown. An average foreclosure costs the bank less than $1,000 in attorney fees. That's it. Nothing special. This is all ignoring the fact that most mortgages are only serviced by the bank. There are individual investors that actually pony up the money for the loans. If the investors don't want to significant modify a loan that now has a history of non-performance, then it isn't going to happen.
It is important to note that there is a bill currently in the Senate which would allow bankruptcy judges to modify these loans as part of a Chapter 13 reorganization. If it were to pass, you could see something like this: The ARM that is now 12% gets paid on an 8% interest rate during the pendency of the case. The upside down mortgage gets reanalyzed judicially to reclassify the undersecured portion as an unsecured debt. The balance that the court would require payments of P&I during the plan would be reduced to the value of the homestead. Write your Senator if this sounds like a solution.
My mom passed away on Thanksgiving day, and we're selling her house on W. Bellfort at Hillcroft. HCAD gave it a "market value of almost $180K, and we're giving it away to a "home vester" type buyer for $110K. We had it listed for about 160K prior to my mom's passing, and before we just gave up with a normal realtor, we had come down to around 140K. The house never even showed...........not once. It just sat there. People all over are sitting on the sidelines and not buying because they either can't get funding or they're waiting to see where the bottom is. In the demographic served by my mom's neighborhood, it is usually the former. I'm sure I could have done better trying to rent it out, but I don't live all that close to it, and I've got a baby on the way.........basically, I just couldn't nut up and do it. Anyhoo..........I've seen the comps in that area, and although I hate to see us give the house away, I'm not too upset as I don't know where the bottom is either--and we're in the same ballpark with other people in the neighborhood who are "giving away" their houses. Because the values have dropped so significantly in areas like this, recent buyers have seen their equity drop significantly below their outstanding mortgage principle balance. If their credit is already poor, sitting in a house for "free" (while they continue to miss mortgage payments) waiting to get foreclosed on might seem more favorable to them than continuing to pay down a mortgage whose principle is currently more than the real property value. THAT is one of the reasons why fixed interest mortgage holders are also defaulting. I couldn't do it myself, but I can see how easy it would be to not want to pour good money after bad. They stay in the house, miss some payments and get several months of free rent before they get foreclosed on.
Any goverent efforts to "help homeowners keep their house" is bank welfare, pure and simple. This bubble needs to burst. We can't keep pumping up markets built on poor foundations. That will just speed up Federal bankruptcy.
That is why the bankruptcy bill is a good idea. 1. It provides a meaningful effort to allow people to stay in their homes, while making sure it is at a fair rate. 2. The gov't will not have to increase expenditures. It can be administered using existing judges and court staff. Increased cases=increased filing fees taken in. 3. There is no bailout expenditure by the gov't. Because you want to stay in your house, plain and simple. If you abandon it, it is unlikely you can buy another house with a recent default. It is also unlikely that you can get into a decent apartment complex with a recent foreclosure.
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when this plan came out it was only going to help a limited number of people, too many qualifications. yes I said so in the original thread.
man i just watched a video on cnn.com. desperate home owners are starting to commit arson to their own homes to collect insurance money to pay back their loans. sad...
I'm surprised that Dallas doesn't have more...There are a ton of homes for sale (lots of expensive homes too), but I think that's everywhere...I truly believe everyone in Dallas lives on credit...
Also, it may not be better for the homeowner. If they are uspide down on the loan, say they owe $200k but the house is worth $150k, they are better off walking away and taking a hit on their credit.
I think even the Fixed Rate folks were going into debt to buy their house. They probably counted on re-financing an appeciating home, using revolving credit, and increasing their work income to finance their "deficit spending." When the mortgage market went down the crapper, they could no longer count on re-financing. Plus, credit is harder to come by, and they don't see the better job prospects. So they just foreclose because they simply cannot afford the home. I think over the last 5 years or so statistics show that Americans were spending more than they made.
It may not be better for them in terms of pure economics, but they have to live somewhere. Once in foreclosure, people seek to save their homes for practical (can't find a decent place to live for much less) and emotional (I want my house) reasons.
