Homeowners are Abandoning their Mortgages

Sadly enough, the economy has hit homeowners incredibly hard. Even when the economic recovery has occurred (which I believe will happen during 2010), many American homeowners are not going to see significant recovery in the values of their homes. Some homeowners have seen the value of their houses drop as much as 75% below the original loan price.

http://xml.channel.aol.com/xmlpublisher/fetch.v2.xml?option=expand_relative_urls&dataUrlNodes=uiConfig,feedConfig,entry&id=828326&pid=828325&uts=1265307834

http://cdn.channel.aol.com/cs_feed_v1_6/csfeedwrapper.swf

Six Horror Stories of Mortgage Modification

Ron Nash, Carlsbad, Calif.
Ron Nash is not someone who's shy about pushing to get what he wants; he's a motivational speaker, headhunter and author of "How to Find Your Dream Job; Even in a Recession." But when it came to obtaining a mortgage workout, he wasn't getting anywhere -- even after months of trying. He finally wrote a letter to the president of his lender to try to resolve the issue. The results were very gratifying -- at first. After that, however, and after he was asked to send in all his paperwork for the fifth time, he didn't hear from them again for six months. Then, recently, he finally got a call back with a loan workout offer.
Full Story: Why He Chose to Walk Away

Courtesy CNNMoney.com

BlackVoices.com

Six Horror Stories of Mortgage Modification

Sue Wright, Las Vegas, Nev.
Real estate agent Sue Wright was one of the earliest homeowners to apply for the FDIC's mortgage modification plan to help insolvent IndyMac's at-risk borrowers keep their homes. But because she was current on her mortgage payments, the bank said it couldn't help her and advised her to stop making payments for two months. She did that and called back right after her second payment was overdue. She was given a plan with a reduced interest rate and told to make the new payments for three months and the modification would become permanent. But after doing that, she received a letter from the bank telling her the modification was off; the investors wouldn't approve it.
Full Story: The Crazy Part Is ...

Six Horror Stories of Mortgage Modification

A. G. Chancey, Longwood, Fla.
Chancey has been trying to arrange a mortgage workout since August 2008, when she was only two months behind on payments. Today, after dozens of phone calls to her lender, she's made progress. But she's now five months behind. She has been in the home for 23 years, but family health problems, divorce and economic factors have conspired against her and she's never been able to substantially pay down the loan. She tried to apply for a mortgage workout, but no one ever seemed to know her status.
Full Story: She May Get Good News Yet

Six Horror Stories of Mortgage Modification

Raul Medina, Moorestown, N.J.
No good deed goes unpunished, they say, and Amber and Joe Tardiff might be forced to agree. When Joe's good friend and partner in a landscaping business, Raul Medina, was left a parapalgegic by an auto accident, the Tardiffs took on the Good Samaritan task of dealing with Medina's mortgage issues. Medina, who's also a minister, owns two properties, his residence and one he bought for a Moorestown, N.J., church to provide shelter for the homeless. But after seven months of roadblocks, wrong numbers, voice mails to people who no longer work for the company, they were told that the lender does not offer any loan modifications.
Full Story: His Only Options Now

Six Horror Stories of Mortgage Modification

Richard and Pati Kays, Stuart, Fla.
"He's 83 and I'm 73, with separate assets, stuck in the mortgage mess. We're not quite in foreclosure but in distress over the inability to sell or refinance," says Pati Kays. Pati married husband Richard seven years ago. He's a retired high-steel construction man. She's a retired attorney who owns five cottages she rents out. Richard was supplementing his pension and social security with the rent from a mortgaged duplex he owns. Not any more. His adjustable rate mortgage reset, and his payment on the $430K mortgage went from $1,750 a month to $2,750. The rent he now receives is only $1,800 a month. Trying to head off problems, Richard called his lender to ask for a workout.
Full Story: Why He's in a Bind

Six Horror Stories of Mortgage Modification

Ken Mobley, Tampa, Fla.
Ken Mobley had some of his best earnings years ever in the mid-2000s, as an advertising sales representative for a media company. But with newspaper ad revenues in decline, he was "reorganized" by his company and now sells ads to mom-and-pop businesses. He called his lender last fall hoping for a hardship consideration and asking for a two-month postponement of his mortgage payments. He wanted to have them added to the end of his mortgage. Mobley says his credit rating was excellent, and he was merely trying to free up some cash for the holidays. The effort failed.
Full Story: His Catch-22

Six Horror Stories of Mortgage Modification

In fact, there are 5.1 million homeowners who've lost over 75% of their home's value during the downturn.

"People like me are beginning to feel like suckers," says Ben Koellmann, a man who estimates that it will be another 15 years before his home reaches the original asking price again. "Why not let it go in default and rent a better place for less?"

Many distressed homeowners are wondering how Congress chose to bailout bankers who are still giving one another hefty bonuses, but left many Americans without the ability to repay the money they owed the bankers in the first place. The bailout funds that went straight to the bankers could have also gone to the individuals who owed the bankers money.

Given that many Americans start to consider walking away from mortgages when the value of their homes have dropped by more than 75%, one challenge of the Obama Administration is how to help these homeowners while simultaneously supporting a genuine economic recovery.

"We haven't yet found a way of dealing with this that would, we think, be practical on a large scale," the assistant Treasury secretary for financial stability, Herbert M. Allison Jr., said in a briefing.

The problems in the real estate market are part of what make this economic downturn more complex than others. We were riding high on the hog on a wave of nothingness, allowing home values to inflate to prices that were unsustainable and unrealistic. The truth is that, at the end of the day, there is going to simply be a massive loss to be eaten by the American people. This loss is no different from the losses incurred when stock prices are too high. But the good thing is that real estate is always going to be a valued commodity and when more responsible financial measures are put into place, we will see consistent growth in the values of these assets.

Overpayment for a home is understandable, since one can't quite make precise assertions of the home's true value. Easy access to capital can lead to an inflation in the values of assets, especially when compounded by the fact that many Americans were allowed to buy homes they couldn't afford. Simultaneously, there are guidelines for how much house you should buy and reasons that you would want to be careful about loans with "creative" financing, such as balloon payments and variable interest rates. That's what can get you into trouble.

Dr. Boyce Watkins is the founder of the Your Black World Coalition. To have Dr. Boyce commentary delivered to your email, please click here.

Categories

Contributors

Other BV Blogs