My old neighbor is getting foreclosed upon.

[Robb]

Or the house is. Whichever. His story was interesting, so I'll try to tell it.

2007 was the year he meant to sell his house and retire. He didn't have a ton of savings, but the house had good equity -- the value, he was told the last time he refinanced, was almost $100K more than he owed. And rising. His plan was to sell the house, take the cash, spend a quarter of it on a sailboat, buy fuel and film with the rest, live pretty simply and sail around selling photographs. I assume someplace tropical.

So 2007 didn't work out as he'd hoped. Or 2008, sounds like. They replaced him at work -- no retirement benefits or anything, he worked for a ski area for a jillion years. He tells me he spent all year trying to sell the house, dropping the price every month or two, spending his savings on the mortgage -- which reset this year, too, so it was twice what it was before. Burned through his small savings making mortgage payments. House sat on the market for what he owed for six months -- turns out the realtors in the area were expecting more than was out there, buyer-wise.

So he realizes hey, I'm out of money. Goes back to his work, they give him 20 hours a week at a reduced pay, best they can do. He realizes he's got to stem the flow, so he calls the bank to tell them he's out of money, can't afford the thing, can we do a modification or something?

That process starts, and drags on. Meanwhile ski area eliminates his part-time position, he's on his ass. Finds 30-hour gig in another ski town four hours away (he's an old mechanic for the lifts, pretty specialized skillset), plus subsidized housing. "With a bunch of goddamn kids," he says. But he takes it. Off he goes.

Meanwhile, there's the house.

All of a sudden he doesn't qualify for a loan modification because he's not living in it. He says OK, can I sign the deed over to you? It's worth about what's owed, he figures. They say yes, but they have to start foreclosure proceedings at the same time as he's qualifying for the "deed in lieu of foreclosure."

The hangup here: he has to re-submit all his financial information. To the bank that's about to foreclose upon him and seek to collect a debt. He balks, tells them to just take his offer.

They say no, so the foreclosure begins in earnest. What the hell, he figures at his age he doesn't need to buy another house so he can take the credit hit. Plus, he shouldn't have much if any that he owes after the bank takes the house, since what he owes is about what it's worth, right?

He finally got a date for the foreclosure auction of his house, three months after he's stopped making payments. Auction gets delayed for reasons he can't figure out. Meanwhile his debt to the bank grows larger every month he misses a payment.

He tells me if they stick to the most recent auction date, he'll have racked up close to ten grand in missed payment debt, plus whatever fees they charge him, plus they'll probably sell the house for less than market to get it sold at all (not much moving in the old neighborhood), so he's actually going to wind up with a deficiency. Which, in our state, they can sue him for and garnish his wages about.

Anyhow. It sounded to me like the bank was padding his debt. He tells me he's thinking about skipping it all and moving to Mexico. I certainly wouldn't blame him. :D

[LisaM]

1. Padded debt

something the banks have been getting away with for a long time. You know, you are $5 short in your checking account for some reason, and they cash your largest check first so you will rack up more NSF fees - they change credit cards to a 29-day billing cycle to wrest one more interest charge out of you during the year - the list goes on and on. All things that could easily be controlled with regulation but aren't.

[Craftsman]

2. This is not the first of this I have heard.

[notesdev]

3. I found the problem

"the mortgage -- which reset this year, too, so it was twice what it was before."

He bought more house than he could really afford, on a boutique mortgage product.

I'm really getting tired of sob stories from people who have been living better than I have because they didn't live within their means (and now I get the bill for their bailout).

These people are the problem, not the victims. The victims are the people who did live within their means and are now getting shafted in order to pay for the sins of those who didn't.

Like you, who now has a (another?) neighborhood foreclosure on the record which will bring your own house value down.

[Robb]

5. Well, not my neighborhood any more.

He was making good money, and probably had he not tried to retire could've afford even the higher payment. Just a guess, of course. And he was trying to sell for a long time. :shrug:

[notesdev]

7. People don't take those loans if they can afford the property

they take them because they expect to flip the property to some sucker who will pay more for it.

Someone's got to be the bagholder at the end of every Ponzi scheme.

[northernlights]

13. yes to a point... except one detail

he could afford the house until he lost his job. He didn't quit his job. He was replaced. And he tried to get out of the house in plenty of time. Timing is everything. If he hadn't been replaced at his original job, he'd still be living in his home and paying his mortgage.

[barb162]

15. Or they take them on thinking the adjustment in a few years will never come.

This and so many other homeowners needed to get a fixed rate mortgage. I know a lot of people in this mess and if they just would have bought something smaller and on fixed rate, they'd still be in their homes. It's sad how many people fell into this same mess.

[sabrina 1]

8. And the banks have no blame in this?

Why would they not renegotiate the mortgage with him? If they took a bailout, it was one of the conditions that banks do that, as Obama said 'to keep people in their homes'.

Wouldn't it benefit everyone if the home-owner continued to pay at a lower rate until things turn around and he could sell the house and pay off the mortgage?

I don't know what bank this was, but I have zero sympathy for these big banks who totally mis-managed other people's money, and then had to come running to the tax-payers to bail them out. I think they owe a little back.

I'm surprised that you seem to have more anger at the homeowner, even if he did make some decisions that weren't wise in your opinion, while the Banks major failures which affected all of us, get a pass.

[notesdev]

9. Of course they do

Banks never get a pass from me, you haven't seen much of what I've posted here if you think that. I've been railing on this issue since before most people were even aware that the economy was headed down the tubes.

However, it takes two to tango. Banks can't lend at gunpoint. What enabled the banks to pull off their scam was the endless legion of "greater fools" who thought they were getting something for nothing, and that includes every last person who got an adjustable mortgage in the expectation of reselling later at a profit.

Yes, the guys who set up the scheme are crooks. So are everyone else who hopped on board with dollar signs in their eyes, many of whom are now crying for sympathy with their foreclosure stories.

Show me someone getting foreclosed on a 30-year fixed mortgage and I'll have sympathy. I reckon you'll be a long time hunting before you find one in the papers giving a sob story.

[Robb]

11. Wow.

"every last person who got an adjustable mortgage in the expectation of reselling later at a profit."

I guess I don't agree. That was the product being sold. Some believe any loan is gaming the system, too. Just because a 30-year fixed is a less risky product, you give them a pass?

[barb162]

18. Sure they have blame but just because an asshole bank gives you an offer

you can refuse it. I had calls offering loans every day for a few years at the height of the bubble. I never took them up on it. If only this "neighbor" of the OP had taken a fixed rate loan, something sensible. I don't think the damned banks should have been bailed out to the extent they were....it was just crazy

[barb162]

16. bingo

"He bought more house than he could really afford" ...and a few million others.

[Warpy]

17. It's tempting to be unsympathetic

I bought less house than I qualified for and put as much as I could down to keep the payments low, so I have ample reasons for smugness.

However, during the process the mortgage company aggressively pushed an ARM at me. It was an incredibly hard sell. I had to put my papers away and get up and walk out to get them to stop talking tommyrot and write a conventional fixed 30 year mortgage. A lot of people don't know to do that. It's not like they teach this stuff in schools.

Add to that the bubble psychology that said the sky was the limit and that prices could only continue to go up because they weren't making more land, after all, and it's a recipe for disaster for a lot of people who really weren't greedy, just gullible.

While I'm a little jealous of the European vacations that illusion bought them, all they have are memories and photographs while they're in a world of hurt and I'm not. I wouldn't exchange places for anything.

[barb162]

19. I'm glad you took the fixed rate!

It reminds me of all the telephone calls I still get, despite being on the no call registry, for "free" home security systems, painting services, furnace cleanings, etc where they want me to decide on the phone. And I just tell these jerks, send it to me in the mail, I'm not making decisions out of the clear blue sky off a phone call from some company I never heard of.

I don't think I'm smug, I just shake my head at some of these ARM deals...people could have done the smart thing as you did, buying a smaller house on a fixed rate, but nooooo.

[AtheistCrusader]

21. I found a way to shut down the free security system assholes.

Ask them to mail you or drop off the equipment, you don't need service or installation. All those alarm panels have wired outputs on the back to plug in a klaxon or alarm horn, so it's actually useful without even service. My neighbors would notice something like that going off and call the cops.

Of course, the 'free gift' security system doesn't work that way, they won't give it to you. One more call like that and I'm going to try hitting up the State Attorney General, because if that ain't predatory, I don't know what is.

[JDPriestly]

4. Meanwhile banks are paying 0.5 to 1.5 interest.

A few pay more, but not that many.

You have to ask where are the banks putting all the money they rake in on high interest rates?

Why are they foreclosing? Why don't they just take their losses and let people keep their homes? Really. The government could do something about this.

They could pass a national Depression law. The number of houses under water now is just appalling. Obama will be remembered not for some of the good things he has done but for this. He has to do something to stop the bleeding.

[sabrina 1]

6. If they already foreclosed on the house, he should not be

getting any bills. Is the house still in his name? If so, then it does sound like they took him for a ride.

My friend was foreclosed on and will leave her home before the end of this month. The bank was Wells Fargo. They refused to renegotiate the loan, never even returned calls, or her lawyer's.

However, in her case, and this may be true of many people who are being foreclosed on, the foreclosure may have been illegal. Her mortgage was transferred several times over the past few years. She asked Wells Fargo to produce the mortgage note to see if they owned it legally. They never responded to those requests. So, as soon as she is settled, her friends and family are going to help her possibly sue Wells Fargo as others have done recently.

One case in California where a couple's condo was foreclosed on, went to the jury. They claimed the bank did not own their mortgage (same reason as my friend, mortigage was securitized). The Jury agreed and returned the Condo to them with punitive damages of over $2 million dollars. Banks are not popular these days and juries and even judges are not happy about the way they've been doing business.

There were one million more fore-closures in the last quarter. My sister told me that on Long Island's east end, where she lives, people are now living in the woods. Churches are trying to help them with food but are down on donations themselves, as previous donors are now financially struggling themselves.

And Banks are now fore-closing on Churches I read recently. Where are the people's bail-outs?

I am really sorry about your friend ~ the only thing I can think of is that he may be able to argue that he is not responsible for costs after the house went into fore-closure.

A very sad story and I wish him well.

[Better Today]

10. If he wants company I'm game. I'm about in the same boat and

have been eyeing an extended trip south as well. Might be more enjoyable to know at least one person on the way.

[mzmolly]

12. Has he considered bankruptcy?

To my understanding that can stop foreclosure. :shrug:

[barb162]

14. It sounds as if he bought the house in the last few years on an ARM

Is that correct?

[Xenotime]

20. So sad to listen to the corporate greed that has ruined america.