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Who Are the Bad Guys?

Sign Of The Times - Foreclosure Courtesy of ResPres

Sign Of The Times - Foreclosure Courtesy of ResPres

Foreclosures Aren’t New

REO properties have been part of the real estate landscape for many, many years. Foreclosure loomed large in melodramas in the late 18th and early 19th centuries. Typically a rascal with a handle bar mustache offered to postpone the seizure of the family homestead in exchange for the the virtue of the heroine  ( Wow- talk about loan workouts and modification!). But melodrama aside, most people were not involved in the drama of foreclosure and bank owned real estate.

Even so, these properties have been a part of the real estate landscape for many years, peaking in times of economic distress, and diminishing in times of economic plenty. From the REO inventory created by economic issues in the COLT states(Colorado, Oklahoma, Louisiana and Texas) in the early 90’s to the disposition of the S&L debacle’s real property through the RTC, to the very limited REO inventory of the last real estate boom, foreclosed properties have been with us consistently.

The Four Horsemen

In most cases, during normal markets, it seemed that the loss of most properties were due in a large part to four causes, Death (or illness), Drugs (or Alcohol), Divorce, or Disenfranchisement (actually this should be unemployment- or business failure, but I really wanted to be alliterative here).

While it was possible to be sympathetic to the borrowers who were overwhelmed by their personal issues or tragedies, the fact was that the majority of people who faced similar trials were able to continue making payments on their obligations. Therefore we all understood that when you borrowed money for a mortgage you had an obligation to pay that money back. For many years I explained the mortgage obligation with the rhyme, “If you pay you stay, If you don’t you won’t”, and so people who were foreclosed upon were not perceived as victims of the mortgage company, they were people who defaulted on an agreement and paid the consequences.

People lost homes, and they moved on. It wasn’t easy, but most people accepted that if they borrowed money, and did not live up to their obligation, they were going to lose the property that they pledged as security. In some cases, they rented, on others they moved in with friends or family, but they moved forward and tried to address their problems. In some instances they ended up buying a home a few years later.

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Now the Rules Have Changed

Recently, I noticed a spate of news stories about people who were picketing the homes of mortgage company employees and executives. The “protests” were arranged by the Neighborhood Assistance Corporation of America (NACA) , who, according to their web site are a “a non-profit community advocacy and home ownership membership organization”.

NACA has created what they call an accountability campaign. Their web site explains it this way.

Executives of financial institutions have amassed huge fortunes on the backs of hardworking American families. While living in their many luxurious homes, they have refused to restructure mortgages that would allow families to stay in their homes. We need to make them accountable for their actions. Join the fight.

While NACA has agreements with many lenders to make your mortgage affordable, the below executives refused. Click on the lender/servicer below to see how they live and how to contact them directly.

As a result of this accountability campaign, Industry executives and employees of the non-cooperative lenders have had people protesting in front of their homes and their privacy violated. OK, I get it. The people who borrowed the money are not wealthy and the people who are executives of large companies make large salaries and live well. And I understand the anger and frustration of the people who are caught in this massive economic turmoil, and are trying to take what they perceive to be active steps to remediate their problem. But isn’t this , in at least some of the cases, misdirected anger or inappropriate behavior?

Is the Lender Automatically the Bad Guy?

Who is to say the the President or Vice President of the company was in fact aware of or responsible for (except in the most general manner) possibly predatory actions by a loan officer hundreds or thousands of miles from their office, and light years away from direct communication with these individuals? Does the economic plight of the borrower mean that this person’s family should be traumatized by such aggressive actions, and that their homes should be inundated by this course of action? Couldn’t the same effect be achieved by protests at the company’s offices or some other venue?

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I know that the former mortgagor is the more sympathetic figure in the foreclosure, but does that mean that all of the individuals that worked in the mortgage industry during the boom are directly and solely responsible for the current situation? At some point the consumer took money from a lender and used it for their own perceived best interest. Shouldn’t they have some accountability?

I watched a television show recently which featured a story about a distressed homeowner. The woman was an elderly woman who had refinanced her home four times in four years. Each time she had taken $20,000 in equity out of her house. The story cast the loan officer as unscrupulous, and talked about improprieties in the loan process, like using her husband’s income for the loans after her husband’s death.

This poor older woman, obviously unsophisticated, looked and talked like a victim. As as she talked with the newswoman about losing her house, and the need for her to be helped, I didn’t hear her say that she would return the $80,000 in equity she had taken.  Though anyone would feel sorry for this little old lady, it did make me wonder what happened to that $80,000?  Was it spent? What did she use it for? Why shouldn’t she have to pay it? Could she really have been that unaware that she would need to make payments when she borrowed the money?

I Don’t Have Any Answers – Only Questions

I struggle with the whole issue of relief for defaulting borrowers.

I am completely sympathetic to their plight, and understand how anyone in that situation can want to seek relief. I am sure there are a percentage of people who borrowed money who anticipated appreciation that didn’t occur, pay increases that didn’t happen, others who lost their jobs in this recession, or did not fully understand the terms of the loan they took. Obviously people who borrowed more than the current value of their home need to have some incentive for remaining in the property, and paying that loan balance off. But all of that having been said, do you think borrowers should bear some responsibility for the repayment of the loan?

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What do you think about these foreclosure situations? What about people that are making their payments? Aren’t they being penalized when these guys get a break? Should they be given some assistance? Is there a way to reward them for doing the right thing? Now is the time for your input. You have the questions – Do you have any answers?

Written By

Bill is an unusual blend of Old & New - The CEO Century 21 Advantage Gold (Philadelphia's Largest Century 21 company and BuzzBuilderz (a Social Media Marketing Company), He is a Ninja CEO, blending the Web 1 and 2.0 world together in a fashion that stretches the fabric of the universe. You can follow him on twitter @Billlublin or Facebook or LinkedIn.

18 Comments

18 Comments

  1. Ginger Wilcox

    March 4, 2009 at 9:52 pm

    I can’t believe you would even consider promoting personal responsibility. You mean if I take out money for cars, vacations and trips, I might have to pay it back? Don’t I deserve a bailout for my Louis Vutton hand bag?
    I understand that there are many people who absolutely were taken advantage of by unscrupulous lenders. The situation is terribly sad for many. With that said, there are many others who have used their homes as credit cards. Do they really deserve a bail out or my sympathy for their extravagance?

  2. Matt Stigliano

    March 4, 2009 at 10:00 pm

    Bill – I have been considering a similar post for some time now. My goal was to write the thoughts swirling through my head and the heads on many others these days, but every time I started writing, it came out messy, frustrated, and at times a little angry. I recognize that people have had some bad experiences, but the personal responsibility factor is gone. So is the idea of a home as a home and not just an investment to be day-traded like a Silicon Valley stock. I have a nice home that I love, but would have preferred a bigger, newer, more custom home – but the facts are the facts, I couldn’t justify getting into a loan that would have wiped me clean. I don’t have the greatest loan on earth for many reasons (self-employed being one of them), but I knew I could do it with ease when times were good and scrape by when times were bad (rock and roll paychecks are about as reliable as real estate paychecks). I want more in life, but knew where I stood, so I did what I could with what I had.

    I’m glad you wrote this as it may finally get me to get my thoughts together enough to say my piece. Thanks Bill.

  3. Matt Stigliano

    March 4, 2009 at 10:01 pm

    PS I used that same @respres photo once before in a post.

  4. Brandie Young

    March 4, 2009 at 10:02 pm

    Oh, Bill this is a slippery slope and a discussion very near and dear to my heart. I could opine for days, but I’ll keep this short-ish.

    Just as there are people that made money up and down the supply chain, there is culpability. I believe there were less insidious motives than people like to believe on the part of lenders, mortgage brokers and realtors. Instead, everyone was enjoying a boom time – including home buyers and sellers.

    It’s our nature to want to point a finger of blame. I contend that if you don’t understand a contract, or are incapable of understanding it, don’t sign it. Keep in mind, the media has also played a huge part in our perception of this. i.e. have you ever seen a story about someone admitting they were hedging their bet and lost? Nope. It’s always our Grandmother, or other sympathetic soul.

    At the end of the day, I don’t think there is a one-answer-fits-all to your questions, as each situation is unique. I will comment that at times it’s difficult for me to swallow the bitter pill that as a reward for being responsible with my primary residence and my investment properties’ mortgages I have no option to negotiate better rates/programs. Not fair, but it is what it is.

  5. Bob

    March 4, 2009 at 10:09 pm

    That this post was written by a real estate broker slays me.

  6. Missy Caulk

    March 4, 2009 at 10:25 pm

    Too late to play the blame game, the interesting thing to me is that all this really came tumbling down in Sept when some unknown sources started draining money from the banks. Who, Why?

    Not to say some of every profession didn’t make mistakes but what about the homeowner who was bound and determinded to get “that” house and went and found a slime ball internet lender to loan them the money.

    We had it happen twice, one lost their home 6 mo later. One is still there.

    The MSM always puts the saddest stories on TV and the papers.

  7. Larry Yatkowsky

    March 4, 2009 at 10:48 pm

    Hey wait a minute there!!

    Wasn’t that 3rd bunch of paper a charitable donation to help a good friend down on her luck. I can tell you it made my Ginger so happy when she was able to get the Louis something or other she wanted.

    It was a little while ago so I can’t remember exactly, but I’m sure the 2nd bunch of paper was a loyal customer gift. That nice feller said they used to give away rifles but I already had one of them. I remember thinking how nice. It seemed so kind that I thought what the hell, share the love. So I got my partner a new F150. Feeling good about what that feller at the bank did I filled it up with gas and threw in one of them fancy Bar BEE ques for the back.

    The 1st bunch I didn’t even read cuz that feller said sign here and not to worry as that one was for my ‘loan some’ sickness. Feeling bad because I lost my job I went to Mexico for a 6 month treatment. Seemed like a nice place to get rid of the blues. Oh! I feel better now.

    Now Bill, I member somebody said sumthin about pay back – hell I thought they were talkin about me being nice back to them!

    Well I didn’t want to be an Indian giver and return those bunches of paper so instead I made sure that every time I passed by in that F150, I waved and smiled.

    Was that the wrong thing to do?

  8. Matthew Rathbun

    March 6, 2009 at 9:35 pm

    I read a bumper sticker recently that said “Honk if Obama has you paying my mortgage”

    (Should be President Obama… let’s have some respect even while jesting, please)

    Everyone is culpable here and all the buyers, lenders, agents, elected officials, et al capitulated and succumbed to the promise of financial stability that is no more than a myth. The government can’t make an economic system that surpasses stupidity of the masses.

    Now the real question IMHO is what do we do to fix the issues and will we be sure to teach our next generations who to never fall into this trap again?

    I dare say that we will not remember this debacle long enough…

  9. teresa boardman

    March 7, 2009 at 3:41 pm

    Bill what you have outlined above is an almost endless discussion in our home. I know people who went crazy with refinancing and I know they understood they had to pay it back. I know people who were taken advantage of to the point where people should go to jail for it. I know people who I honestly think are too stupid to be allowed to sign legal documents of any kind. I have heard it all and I am sure you have too. I wish I could blame one person or organization for all the pain I am seeing but I really don’t live in a black and white world.

  10. Lisa Sanderson

    March 8, 2009 at 7:21 pm

    Yeah, what T said.

    And don’t forget the people who see the current environment as an opportunity to scam the system and get something for nothing. Or the ones that let their house go to foreclosure because they just don’t want it anymore and it’s (in their eyes)ok because everyone else is doing it.

    It’s a crazy world out there.

  11. Paul Francis

    March 11, 2009 at 3:54 pm

    And if the money was not made available to buy homes… they would be protesting that.

    Perhaps we need a homebuyers Ed course with a test like we do for Drivers Licenses…

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