This was from an old blog, written Feb. 05, 2009.
The problem:
Middle/Upper Middle class families who have paid their bills on time and aren't currently unemployed are simply screwed. These are the families that make from 75k-200k a year and most likely sit in a house that 2 years ago was valued between 250k-500k.
Because they aren't unemployed, they will not "qualify" for any existing programs even though they most likely will face unemployment in the next year. They are living in a house that is 50-60% of it's mortgage value, so they can not sell it to move to a better employment opportunity. These families are left with only ONE option by the mortgage companies and the existing programs - non-payment of the mortgage. Because these are "reasonable" and "responsible" families they are caught in the dilemma of:
1. Waiting for the "worse" to happen and having it impact their family in an "unpredictable" manner.
2. Assuming the "worse" will happen and plan according to have the LEAST impact upon their family.
No family with children wants to relocate to another school district within a school year. No family that continues to pay the mortgage can adequately "save" for a move out of state that offers better job opportunities. We all know it's better to find a NEW job while one has a job rather than waiting to be laid off. If the family believes that one of the working members in the house will get laid off within the next 18 months, their credit is going to take a hit anyways. There will be no avoidance of this.
Mortgage companies don't do "deals" until you stop paying. Call enough and someone at your mortgage company will end up telling you this out right. You only have access to their "internal" departments that can pursue "options" based upon the status of your payments. You'll need to go 90 days plus before you get to some "REAL" choices. The only phone calls you'll get from them is from an auto-dialer computer program that will simply ask you to make a payment. Your REAL communication with the departments that can do anything will come via regular mail
When they ask you to do an income statement, it's really a joke. I ran through this 4 times now, each with different results. They include variables such as "entertainment", "food", gas, and so forth. One time, I had something like $50 dollars left over and they replied that I didn't qualify for anything because I was over budget. One time I showed $600 left over and that would only qualify me for a "repayment" plan. Like I said, this is simply an absurd request on their part. For a middle class family, expenses such as food, entertainment, gas, and so forth can fluctuate well beyond their "black magic" numbers they are looking for to qualify for a program that is a real solution. And, the problem is NOT the payment it's the stress of being in a unpredictable situation where your options only become WORSE will the "emergency" does happen.
Remember, the CORE problem is the family sitting in a house 50-60% of it's value. Under this circumstance, the homeowner is screwed IF:
1.One working member gets laid off
2.A better economic opportunity arises that requires them to move
In both cases, the family is looking at NOT paying on their mortgage anyways. The only difference is they will be presented with the same crappy options except they'll only have ONE income or less money in savings to actually move to the new job location.
Credit Counselor's that they might direct you to can not help you UNLESS you really are in an emergency situation - i.e. laid-off, etc.. And even then, your still presented with the same scenario as listed above.
The whole situation is absurd, it fails to address the MAJOR issue of the majority of home owners. Which is:
A. Why am I sitting in a house that is at 50% of what I owe?
A1. If “normal” housing values increased annually at 4% and my house is currently between 50-60% of my mortgage value, it will take longer to appreciate to mortgage value than the 7-10 years to remove the foreclosure.
B. How can I afford to stay in this physical location when unemployment is on the rise and other areas/state would offer me better opportunities if I move?
B1. How can I wait in this house at 50% of mortgage value knowing I have a high degree of me or my spouse being laid off AND our next job will most likely pay 70% of what the old job made?
B2. And once layoff happens, I now can't "plan" a move to the locations that might offer better employment opportunities.
B3. I would now be in the situation of trying to short-sell the house with the lose of 1 of our incomes.
B3A. Every month I stay in the house it will continue to depreciate, most likely making a short-sell that much harder to get approved by the mortgage company.
In summary, it was the mortgage companies, the appraisal assessors, the local governments, and federal government that acted in accord and conspiracy to create the artificially high property values and the allowance of mortgages to be given based upon the artificially high property values. They were not ignorant of the situation and are culpable. They are continuing to try and get the Middle/Upper-Middle class families to feed them the profits of their conspiracy. They want us to continue to pay them their profit margins as they predicted in 2000-2008. They imply we have a “moral obligation”, that we still make enough, that there our “solutions”. All of them are lies. There is no moral obligation, the contract is they get the house and you take the hit on your credit report. Making enough doesn't fulfill my REAL moral obligation to my family when determining what to do in uncertain times. They don't offer any solutions until you refuse to pay – at this point for the middle-class person, having a negative hit on the credit report is a point of no return...and THEY know that. They know that the person that stops paying the mortgage when all indicators prior to that shows they pay on time that they crossed a decision point. That the person finally saw the situation for what it was and said, “F*ck you. Your right, I do make enough money. Enough money I don't actually need “credit” to live. If I stop paying your mortgage and I can rent a house for half of it in this economy and the pay down my other lines of credit with the difference.”
Possible Personal Solutions:
1. Weigh your circumstances and if you determine that you simply can't let things stay as they are because of the possible negative risks to your family, then:
2. Attempt to call mortgage company to see if they offer any solutions. Most likely they will not while your making your payments, but it always depends as well on WHO is actually holding/backing your mortgage.
3. Plan out when you'll stop making the mortgage payment. You'll want to have a “guess” of when they'll be able to ask you to leave the house. If you have children, you'll want to consider how to place this during the “summer” months so the kids can start a normal school year.
4. Figure out what do with the “mortgage money”
4A. Pay down other lines of credit, try to increase your credit score while the non-payment on the mortgage brings it down.
4B. Setup a old fashion banking system for savings for the “move” or possible costs of a restructured mortgage or other option the mortgage company might give you. (lock box with cash)
4C. If you are moving outside of your current area, you should do a spread sheet of your bills and then determine if you pay off things as you go and that you can live on one income and on cash. Assume that everyone in your household that works might not get a job “right away”.
5. At some point, hopefully your mortgage company will indicate that they will entertain a short-sale on your house. You'll need to demonstrate “hardship” at one point. A spouse working & living in another area is considered as such I believe. Again, this can coincide with the summer months when your preparing the kids for a new school year.
5A. Note, as soon as the mortgage company knows that NO ONE is living in the house the rules can change. They can/could foreclose on it immediately for example. This might or might not be the situation your looking for. So, you should discuss with your spouse if one is willingly to “stay behind” to extend the possibility for doing the short-sale.
Political Solutions:
In order of priority.
1. Educate home owners on the “Mortgage Forgiveness Debt Relief Act of 2007”.
1A. Ref - http://en.wikipedia.org/wi
1B. Ref - http://www.irs.gov/individ
1C. The “Emergency Economic Stabilization Act of 2008” extended this to 2012.
1CA. http://en.wikipedia.org/wi
1CB. “The mortgage debt forgiveness provision of the Mortgage Forgiveness Debt Relief Act of 2007 is extended by three years, so that it applies to debts forgiven through the year 2012.”
1D. What this means, if your mortgage was for 400k and a short-sale of it only get 200k, you can be 1099 on 200k as “income”. Just guessing here, what you'll be hit for about 60K in taxes – taxes you will NOT be able to escape from. This situation should weigh heavily upon your decision making chioces about what to do and when you should do it by. You'll need to investigate the “clauses” when it comes you any secondary loan you have against your house.
2. Stabilize home ownership/stop foreclosures.
2A. Restructure mortgages to "current market" values with 30yr fixed rates.
2B. Fed's insure against loss of original loan value to new "market value" for 10 years. If house is sold/loss within 10 years, insurance program pays out to mortgage holder.
2B2. Homeowner sees no "gains" to selling house if within 10 years up to the original loan value.
2C. Purge non-payments from credit report in regards to mortgage once restructure is done. The non-payments should not effect the restructured interest rate if non-payments occurred after Jan. 2008.
2D.. Tax incentive for home owners to stay in house of restructure mortgages.
3. Track foreclosures and once they stabilize then offer incentives to home buyers. If this is done before number 1, it will just allow the "rich" to continue to get rich. Creating a buyers market as things are now will just continue to depreciate home values.
4. Mortgage regulations law changes - go back traditional home purchase standards. 20% down and equity lines can't be done against home that exceed 80% of total value of home. This acts as a "cushion" for drops in housing values.
4. Independent investigation of senators and those who profited from situation.
The problem:
Middle/Upper Middle class families who have paid their bills on time and aren't currently unemployed are simply screwed. These are the families that make from 75k-200k a year and most likely sit in a house that 2 years ago was valued between 250k-500k.
Because they aren't unemployed, they will not "qualify" for any existing programs even though they most likely will face unemployment in the next year. They are living in a house that is 50-60% of it's mortgage value, so they can not sell it to move to a better employment opportunity. These families are left with only ONE option by the mortgage companies and the existing programs - non-payment of the mortgage. Because these are "reasonable" and "responsible" families they are caught in the dilemma of:
1. Waiting for the "worse" to happen and having it impact their family in an "unpredictable" manner.
2. Assuming the "worse" will happen and plan according to have the LEAST impact upon their family.
No family with children wants to relocate to another school district within a school year. No family that continues to pay the mortgage can adequately "save" for a move out of state that offers better job opportunities. We all know it's better to find a NEW job while one has a job rather than waiting to be laid off. If the family believes that one of the working members in the house will get laid off within the next 18 months, their credit is going to take a hit anyways. There will be no avoidance of this.
Mortgage companies don't do "deals" until you stop paying. Call enough and someone at your mortgage company will end up telling you this out right. You only have access to their "internal" departments that can pursue "options" based upon the status of your payments. You'll need to go 90 days plus before you get to some "REAL" choices. The only phone calls you'll get from them is from an auto-dialer computer program that will simply ask you to make a payment. Your REAL communication with the departments that can do anything will come via regular mail
When they ask you to do an income statement, it's really a joke. I ran through this 4 times now, each with different results. They include variables such as "entertainment", "food", gas, and so forth. One time, I had something like $50 dollars left over and they replied that I didn't qualify for anything because I was over budget. One time I showed $600 left over and that would only qualify me for a "repayment" plan. Like I said, this is simply an absurd request on their part. For a middle class family, expenses such as food, entertainment, gas, and so forth can fluctuate well beyond their "black magic" numbers they are looking for to qualify for a program that is a real solution. And, the problem is NOT the payment it's the stress of being in a unpredictable situation where your options only become WORSE will the "emergency" does happen.
Remember, the CORE problem is the family sitting in a house 50-60% of it's value. Under this circumstance, the homeowner is screwed IF:
1.One working member gets laid off
2.A better economic opportunity arises that requires them to move
In both cases, the family is looking at NOT paying on their mortgage anyways. The only difference is they will be presented with the same crappy options except they'll only have ONE income or less money in savings to actually move to the new job location.
Credit Counselor's that they might direct you to can not help you UNLESS you really are in an emergency situation - i.e. laid-off, etc.. And even then, your still presented with the same scenario as listed above.
The whole situation is absurd, it fails to address the MAJOR issue of the majority of home owners. Which is:
A. Why am I sitting in a house that is at 50% of what I owe?
A1. If “normal” housing values increased annually at 4% and my house is currently between 50-60% of my mortgage value, it will take longer to appreciate to mortgage value than the 7-10 years to remove the foreclosure.
B. How can I afford to stay in this physical location when unemployment is on the rise and other areas/state would offer me better opportunities if I move?
B1. How can I wait in this house at 50% of mortgage value knowing I have a high degree of me or my spouse being laid off AND our next job will most likely pay 70% of what the old job made?
B2. And once layoff happens, I now can't "plan" a move to the locations that might offer better employment opportunities.
B3. I would now be in the situation of trying to short-sell the house with the lose of 1 of our incomes.
B3A. Every month I stay in the house it will continue to depreciate, most likely making a short-sell that much harder to get approved by the mortgage company.
In summary, it was the mortgage companies, the appraisal assessors, the local governments, and federal government that acted in accord and conspiracy to create the artificially high property values and the allowance of mortgages to be given based upon the artificially high property values. They were not ignorant of the situation and are culpable. They are continuing to try and get the Middle/Upper-Middle class families to feed them the profits of their conspiracy. They want us to continue to pay them their profit margins as they predicted in 2000-2008. They imply we have a “moral obligation”, that we still make enough, that there our “solutions”. All of them are lies. There is no moral obligation, the contract is they get the house and you take the hit on your credit report. Making enough doesn't fulfill my REAL moral obligation to my family when determining what to do in uncertain times. They don't offer any solutions until you refuse to pay – at this point for the middle-class person, having a negative hit on the credit report is a point of no return...and THEY know that. They know that the person that stops paying the mortgage when all indicators prior to that shows they pay on time that they crossed a decision point. That the person finally saw the situation for what it was and said, “F*ck you. Your right, I do make enough money. Enough money I don't actually need “credit” to live. If I stop paying your mortgage and I can rent a house for half of it in this economy and the pay down my other lines of credit with the difference.”
Possible Personal Solutions:
1. Weigh your circumstances and if you determine that you simply can't let things stay as they are because of the possible negative risks to your family, then:
2. Attempt to call mortgage company to see if they offer any solutions. Most likely they will not while your making your payments, but it always depends as well on WHO is actually holding/backing your mortgage.
3. Plan out when you'll stop making the mortgage payment. You'll want to have a “guess” of when they'll be able to ask you to leave the house. If you have children, you'll want to consider how to place this during the “summer” months so the kids can start a normal school year.
4. Figure out what do with the “mortgage money”
4A. Pay down other lines of credit, try to increase your credit score while the non-payment on the mortgage brings it down.
4B. Setup a old fashion banking system for savings for the “move” or possible costs of a restructured mortgage or other option the mortgage company might give you. (lock box with cash)
4C. If you are moving outside of your current area, you should do a spread sheet of your bills and then determine if you pay off things as you go and that you can live on one income and on cash. Assume that everyone in your household that works might not get a job “right away”.
5. At some point, hopefully your mortgage company will indicate that they will entertain a short-sale on your house. You'll need to demonstrate “hardship” at one point. A spouse working & living in another area is considered as such I believe. Again, this can coincide with the summer months when your preparing the kids for a new school year.
5A. Note, as soon as the mortgage company knows that NO ONE is living in the house the rules can change. They can/could foreclose on it immediately for example. This might or might not be the situation your looking for. So, you should discuss with your spouse if one is willingly to “stay behind” to extend the possibility for doing the short-sale.
Political Solutions:
In order of priority.
1. Educate home owners on the “Mortgage Forgiveness Debt Relief Act of 2007”.
1A. Ref - http://en.wikipedia.org/wi
1B. Ref - http://www.irs.gov/individ
1C. The “Emergency Economic Stabilization Act of 2008” extended this to 2012.
1CA. http://en.wikipedia.org/wi
1CB. “The mortgage debt forgiveness provision of the Mortgage Forgiveness Debt Relief Act of 2007 is extended by three years, so that it applies to debts forgiven through the year 2012.”
1D. What this means, if your mortgage was for 400k and a short-sale of it only get 200k, you can be 1099 on 200k as “income”. Just guessing here, what you'll be hit for about 60K in taxes – taxes you will NOT be able to escape from. This situation should weigh heavily upon your decision making chioces about what to do and when you should do it by. You'll need to investigate the “clauses” when it comes you any secondary loan you have against your house.
2. Stabilize home ownership/stop foreclosures.
2A. Restructure mortgages to "current market" values with 30yr fixed rates.
2B. Fed's insure against loss of original loan value to new "market value" for 10 years. If house is sold/loss within 10 years, insurance program pays out to mortgage holder.
2B2. Homeowner sees no "gains" to selling house if within 10 years up to the original loan value.
2C. Purge non-payments from credit report in regards to mortgage once restructure is done. The non-payments should not effect the restructured interest rate if non-payments occurred after Jan. 2008.
2D.. Tax incentive for home owners to stay in house of restructure mortgages.
3. Track foreclosures and once they stabilize then offer incentives to home buyers. If this is done before number 1, it will just allow the "rich" to continue to get rich. Creating a buyers market as things are now will just continue to depreciate home values.
4. Mortgage regulations law changes - go back traditional home purchase standards. 20% down and equity lines can't be done against home that exceed 80% of total value of home. This acts as a "cushion" for drops in housing values.
4. Independent investigation of senators and those who profited from situation.
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