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It’s Too Easy To Make Banks The Punching Bag

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The latest scandal to hit the real estate industry (foreclosure robo-signing)  has really gotten me fed up.  Is it wrong?  Yes.  Is it being investigated?  Yes.  We know they’re wrong, and they SHOULD be taken to task over it, but this problem is not a matter of whether banks should or shouldn’t be foreclosing on these homes, it’s a problem of paperwork being improperly reviewed.

The average home buyer spends less than 5 minutes reviewing their loan docs when they buy a home, and as it turns out the banks care about reviewing documents as much as the buyer does.  I have a hard time finding anyone to be sympathetic towards in this mess.  The homeowner has stopped paying the mortgage, and the banks want to recover their non-performing investment.  At it’s core, the issue is simple:  If you want to stay, you gotta pay.

It takes an average of 1.5 YEARS to be foreclosed on in Maryland.  Even after the foreclosure, the former owner can stick it out in the house for an additional 3-4 months before the bank can finally get their confirmation complete and an eviction order through the courts.  That’s nearly 2 YEARS of residency without a single mortgage or rent payment.

I think it’s important to remember that nobody would be in the situation if they paid their mortgage on time.  I know that people feel cheated by the banks thanks to complicated loans and falling home values, and I don’t blame anyone who decides to walk away rather than continue paying, but it’s a damn shame that the same people who couldn’t be bothered to READ their loan docs now complain about banks not reviewing their documents either.

Everyone is getting cheated here, folks, and it’s a vicious cycle.  Banks built exotic loans, buyers failed to pay attention, people lost control of their finances, banks started foreclosing, property values dropped, more people got trapped, banks foreclosed more, people started walking away, prices dropped further, banks foreclosed more, and now people blame banks for improperly foreclosing on people that AREN’T paying their mortgage.  Don’t think for a moment that the banks are the only culprit, they’re just the easiest to blame.

(image courtesy of arriba via Flickr CC)

I'm a Realtor in Southern Maryland. I grew up surrounded by the RE business, spent time as an actor, worked as a theatrical designer and technician, and took the road less traveled before settling down in real estate. I run my own local market website at https://www.somdexpert.com and when I'm not at the office or meeting clients, I can usually be found doing volunteer work, playing with my 3 rescued shelter dogs (Help your local Humane Society!), or in the garage restoring antique cars.

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23 Comments

23 Comments

  1. Brandie Young

    November 2, 2010 at 5:49 pm

    Thanks, Jonathan.

    I’m right there with you. There’s an entire chain of blame here, and homebuyers need to own their fair share.

    i could go on … but my soapbox is in the other room 🙂

    Have a great day.

    Brandie

  2. Sheila Rasak

    November 2, 2010 at 6:59 pm

    Look, great blog and I mostly agree with you. However, you did leave out a vital point by almost indicating that your average homeowner has a choice on whether or not to pay their mortgage obligations and they simply decided not to pay. This is a bit misleading and I’m pretty sure it wasn’t your intent. I have true hardship cases where the homeowner CAN’T pay the mortgage. We are currently at 12.4% unemployed as a nation…not to mention any accounting for the underemployed. What about the hardship cases involving health, death of a family member, or relocation for a job opportunity?

    Do I feel sorry for the mess the banks are in? You bet. Do I feel bad that the nation’s homeowners are suffering losses as well? 100% yes. These homeowners were capable of doing the math and if it felt too good to be true it probably was. There was a huge dog and pony show going on for way too many years suckering in many buyers who never anticipated a job loss, reduction of income, or death of a family member.

    I can only say that the only reasonable way through this mess is to keep putting one foot in front of the other, stop the blame and shame game and move on by foreclosing where necessary and short sales on homes to help preserve the dignity and (some) credit for the borrower.

    • Jonathan Benya

      November 2, 2010 at 7:16 pm

      You’re very right, allow me a chance to clarify. Yes, there are plenty of people who are losing their homes because they lost their job, I get that. Strategic defaults account for roughly 18% of all foreclosures, nationwide, although that figure is higher in my home state.

      I would be hesitant to try and factor health/death/relocation defaults simply because I’m not sure that is really a big influence here unless there has been a sudden decline in the general health or mortality rates in America. People get sick, die, etc. and get foreclosed on because of it. That’s happened for decades, and the exploding volume of foreclosures has nothing to do with those reasons.

      It’s easy for us to play armchair quarterback, but vilifying the banks because they’re making not reading documents properly is not the proper solution. We need to accept that these people are in a bad way, work through the foreclosures, and recover our economy. We don’t recover by giving people an even longer free ride. Harsh, I know, but nobody is a saint in this mess.

      I view people going to foreclosure as main street’s version of the bailout. The banks got the money, at least those getting foreclosed on have some financial relief for a couple years until the bank repossesses the house. I don’t blame people who stop paying their mortgage for being bad people, It’s your right to choose not to pay, just be prepared for the consequences.

      I do think it’s unfortunate that banks put themselves in such a position that homes they should be foreclosing on are continuing to rest in limbo because the lawyers signing affidavits couldn’t put on a pair of big boy pants and do their damn job (pardon my french).

  3. Mark Brian

    November 4, 2010 at 11:06 am

    It is a terrible mess we have in housing with the foreclosures, robo signer, etc etc. Isn’t human nature to want to blame others or find excuses for our behavior? I enjoy having the banks to blame, but totally understand that the blame should be shared by many. It is a complicated situation, and a sad or frustrating one also.

  4. Melissa Zavala

    November 4, 2010 at 8:42 pm

    Jonathan: While it doesn’t always take two years in California, your point is well taken. Blame it on the banks; blame it on the economy or blame it on our government. What ever happened to taking responsibility for your actions?

  5. White Bear Lake Homes

    November 4, 2010 at 11:33 pm

    One statement that Jonathan said above resonates with me the most, that is, “think it’s important to remember that nobody would be in the situation if they paid their mortgage on time.” I couldn’t agree more strongly! It is amazing how, in the last 3 years, that it has become acceptable to walk away from your financial responsibilities. Some try to disguise their guilt by saying, “Oh, we’ve decided to give our house back to the bank.” What?! “Give” our house “back” to the bank? When did the bank ever own your house? The bank is only a lien holder on the title…not the owner on the title! In any event, we are caught in a vicious cycle that will simply take time to smooth out.

  6. Michael LaPeter

    November 5, 2010 at 2:08 pm

    Personally, I think the majority of the mess was caused by a combination of banks and investment banks doing sloppy work. Banks were purposefully lax in approving borrowers, because they were making a large profit. Investment banks and ratings companies were purposefully lax in packaging the loans into investments because they were making a large profit. They knew what they were doing, and the people at the top made a lot of money.

    I don’t think they should be made the only punching bag, (homeowners have a responsibility too), but I think just saying everyone is to blame is not accurate enough to prevent this from happening again in the future. At some point, there needs to be a day of reckoning (or at least a little housekeeping) within the financial industry, or we’ll continue to have problems.

    • Jonathan Benya

      November 5, 2010 at 2:16 pm

      You could go a step further with that line of thought, methinks. Did the banks wake up one day and say “hey, let’s start lending to people with bad credit”, or did Government deregulation and encouragement from the feds push banks to make less than prime loans?

      You’re right, there needs to be some serious housekeeping in the mortgage industry. If this market has taught us anything, it’s just how gullible people (at large) can really be when it comes to finanaces. I think everyone got bamboozled here. Banks, the Government, homeowners, you name it.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

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Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

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Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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