Consider this troubling question: Do mortgage lenders have any obligation to take over a property that has defaulted on its mortgage?

Trib_masthead_home

The short answer, it appears, is no: 

I hadn’t previously considered this, until a recent article in the Chicago Tribune started me down this path.

Foreclosures and REOs properties are impacting more than the neighborhoods they are in — they are actually adversely impacting the real estate business — especially when it comes to foreclosed homes in possession of lenders (REOs).

First, have a look at some recent data regarding REOs:

"Across the country, federally
chartered banks held more than $12 billion worth of foreclosed properties at the
end of 2007, about 100 percent more than a year earlier. Of those, $6.6 billion
are residential properties of one to four units, said Keith Leggett, senior
economist at the American Bankers Association.

One housing data firm said
it found the same extraordinary doubling in the Chicago area in what’s known as
REOs—real estate owned by lenders and investors. First American CoreLogic, based
in Santa Ana, Calif., said it determined that 2.5 percent of all housing in the
region is in this category, though two other firms calculate a lower
figure.

Still, the 100 percent increase carries profound implications for
the real estate economy because decisions by individual banks—to wait out the
slump or dump properties on a deadened market—almost certainly would affect
property values."

Okay, that’s typical of most situations: Delinquency leads to default, then foreclosure proceedings. Once a lender retakes the property, the REO leads to a decision on when to best resale — immediately, or wait it out.

Some lenders are approaching the Foreclosure process a little bit, how shall we delicately call this — differently. They are considering the sale decision prior to even taking possession. Their conclusions may surprise you:

"In some cities that have low property values, where there are dense
concentrations of foreclosures, you see lenders who file foreclosure proceedings
but don’t actually take control of the properties, because the lenders have to
maintain them and pay taxes on them
."

"There are areas in some
parts of the country where property values are quite low, and there are no
large-scale expectations of them going up. They don’t know that they will ever
recoup those costs," and so the lenders never re-take title to the properties,
allowing them to become derelict
."  (emphasis added)

There you have it: Abandoned, Non-REO Foreclosures.

The local market conditions are what seems to determine the abandonment decision. In a region where the job and real estate market is doing anything better than "a little soft," I would surmise that abandonment makes no sense at all.

However, at a certain point, in a weaker region, with declining neighborhoods, certain lenders might make the decision to simply walkaway from a large swath of (potential) real estate holdings, on the simple basis that it might be cheaper to do so.

There are very significant costs to this. Consider what the potential impact of these property abandonments by the lender means:

- Total write off of the loan;
- Boarded up homes / neighborhoods;
- Loss of tax revenue to the local school district or town;
- Long delays before the local town, municipality, or state can take possession due to tax arrears.

Thus, these incomplete foreclosures/abandonments can have very significant impacts.

If this becomes widespread, we could be in the process of creating an entire new universe of suburban slums . . .

>

Source:
As owners default, lenders move in
Mary Umberger, Becky Yerak and Tara Malone
Chicago Tribune, March 31, 2008
http://www.chicagotribune.com/business/chi-foreclosure_monmar31,0,1221355.story

Related:
The Next Slum?   
Atlantic Monthly, March 2008
http://www.theatlantic.com/doc/200803/subprime

Category: Credit, Economy, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

97 Responses to “Lender-Abandoned, Non-REO Foreclosures”

  1. GreenMachine says:

    No big deal; if these properties have become abandoned (no property taxes are being paid) the City/County can take possession. (Imminent Domain) Great opportunity for refurbished low income housing, or better yet bulldoze and create a park, green space, community garden, etc. People migrate to jobs. If jobs leave, people leave. If no people left, return the land to the agriculture, forest, grass lands, that were there before the cheap, ugly subdivision inconveniently located miles and miles away from employment centers.

  2. zero529 says:

    So if they’re not taking title, what happens to the property? Is it just open to squatters? How do you keep any control if you don’t hold title? Or does it go to the municipality?

    The Detroit MLS looked bad, but I shudder to think what else we might see . . .

  3. brasil says:

    …throw in lenders who foreclose and are stuck with exorbitant monthly taxes insurance and other expenses …no or few buyers who can qualify …in South Florida alone there maybe $100 billion in real… not book value losses…as liquidity dries up things here anyway are only in the 3rd inning by my eye…what happens when lenders don’t want triple AAA properties back..can’t happen ? ..I was in Houston in the late 80′s buying gorgeous brand new Triple AAA empty office buildings for 10 to 20 cents on hard construction cost dollar for a company I worked for…Miami and parts of the South coast remind of this.. by the way Barry great blog ..

  4. esb says:

    Err … hold on just a moment here.

    If you are a lender who just wants to wash your hands of a debtor AND his property all you need to do is write off the debt and send to the county recorder the lien release documents and poof, “you are out.”

    Why even bother with the “foreclosure” part of the thing. It is just a waste of time and resources.

  5. Albert Einstein says:

    Seems like a non issue to me. Home prices in the vast majority of places are not going below the cost to maintain the property. Also, home prices don’t have to go up for them to recoup their value. They can simply rent them out.

  6. Royce says:

    What’s the point of foreclosing but not taking title? It sounds like the owner would just stay in the house, pay the taxes, maintain the property, and move to quiet title some time later. And what happens in jurisdictions in which the owner has the title and mortgage creates only a security interest?

  7. wally says:

    Very interesting. I suppose you’d have to follow the money: is there an obligation to pay the property tax that, by local law, falls on anybody but the owner who abandoned the place?
    Some areas might end up back in 1950′s style ‘urban renewal’ if cities end up owning the stuff. That is their only way out. Fix-up is not worth the investment and no developer will come in unless you can clear out all the old stuff and turn over a ‘clean’ site.

  8. michael schumacher says:

    Interesting that some foreclosure sites are now titled “Bargain Network” and offering deals “30-60% off Market Values”

    Trying to shift psychology yet again.

    And re: Goldman pushing BSC….

    Goldman knows everything before everyone else.
    Former CEO of GS contacts his buddies to get the ball rolling so that they can sit in Congress and justify the whole thing. “It was all so quick” seems to be the mantra they spin to us….if what Blodget says is true then it’s pretty obvious they were sacrificed with full complicity of all involved….except no one bothered to tell BSC at the time.

    Sanctioned stealing

    Ciao
    MS

  9. Braden says:

    There’s an REO speedwagon / Mortgage collapse joke in here somewhere, but I can’t find it.

    Royce raises an excellent point; why foreclose if you don’t want the place, and the hassle/cost that comes with it? Once everyone stops trying to screw each-other, I say the mortgage holders make a downward adjustment to the principal, write off the amount adjusted, and continue with business as usual; trying to con some other poor sucker in to buying garbage he can’t afford with money that doesn’t exist.

  10. michael schumacher says:

    a typical foreclosure (what’s that anymore!!) costs the banks on avg. about 45-50K

    Do the math and you see why they don’t want them at all..

    Ciao
    MS

  11. Lee says:

    Does anyone see the irony here? Lender’s have spent the last 6 months talking about the “immorality” of jingle mail. Apparently they have no problem turning the keys over either(to anyone but them).

  12. Paul in NYC says:

    Empty, abandoned houses are just the extreme end of this whole fabricated housing boom /bubble.
    At one end you have people selling at a loss of walking away from their ARM’s, and then the foreclosed houses, and finally at the far side of the process, you have not only the empty houses, but the new subdivisions abandoned in mid construction- their wood framed carcasses rotting away in the elements, or lonely foundations filling with rain water.

  13. Questions

    QUESTIONS….Q: What happens if a buyer who can’t make his loan payments decides to just walk away from the house? A: The bank takes title and tries to sell the house, either now or later, when the market improves. Q:…

  14. Matt M. says:

    Probably better off on another post,but since it was mentioned here:

    BSC overpayed for their inventory…couldn’t price their inventory…couldn’t sell their inventory…and had that inventory acting as collateral. If you put yourself in position to be crushed by the market or your competitor, then that scenario will normally play out. BSC was shown to be clowns masquerading as traders.

  15. Fear the Data says:

    There are other industry impacts to this situation and others like it. Based on anecdotal evidence, utility companies are taking larger write-offs because people walk away from their houses without notification and stop paying the utility bills. By law in many states, utilities cannot turn off power or gas to homes from ~Nov to ~April so they are stuck. Even when they know foreclosure has happened, they are having a much harder time than in the past getting banks to pay the utility bills.

    This is anecdotal based on conversations with folks in utilities serving states from the midwest to TX and the Mountain west. I would be fascinated to see a rigorous analysis.

  16. DavidB says:

    I guess that is the positive side of a fractional reserve banking system that leverages every dollar up 10 fold. For every dollar you lose you are really only losing a dime in real money

  17. SR says:

    OT…Sort of: Builders First! Uh, what was the question? Oh Yeah, crumbs for the strapped homeowners…

    Btw A ‘win-win’ for creative truthtelling with reinstatement of losses! Time to reprice executive options, eh?

    Housing Accord Puts Builders First (Washington Post)
    http://www.washingtonpost.com/wp-dyn/content/article/2008/04/02/AR2008040202293_pf.html

    Senate Democratic and Republican leaders rushing to address the nation’s housing crisis reached agreement yesterday on a package that would provide billions of dollars in tax rebates to the slumping home-building industry while offering little to homeowners threatened with foreclosure.

    After working through Tuesday night to flesh out a bipartisan agreement, lawmakers unveiled a bill that rejects the most ambitious plans for aiding distressed homeowners, including a Democratic proposal to permit bankruptcy judges to modify the mortgage on a person’s primary residence.

    Instead, lawmakers settled on a sharply scaled-back array of measures that would provide $4 billion in grants for cities to buy foreclosed properties, temporary tax breaks worth up to $7,000 for home buyers who purchase foreclosed properties, and new tax deductions for almost every American who owns a home. The package, which would cost about $15 billion over the next 10 years, also would jump-start stalled legislation to streamline the Federal Housing Administration, one of the top priorities of the Bush administration.

    Families who cannot afford to repay their home loans – the group at the heart of the mortgage meltdown – would benefit mainly from $100 million to expand foreclosure counseling services and greater latitude for local housing authorities to use tax-exempt bonds in refinancing subprime loans.

    Home builders and other businesses suffering losses in the flagging economy, meanwhile, would get the lion’s share of federal spending in the bill: $6 billion in tax rebates.

    snip

  18. I apparently missed a Business Week cover story on this some time ago:

    Geez, how did I miss that? Was that a vacation week?

    Two issues I am wrestling with: First, how many of these are there? I cannot find any sort of hard data.

    2nd, what basis does a citylike Buffalo have to enforce a banks election not to enforce its lien ? Is a lien against a property an option or an obligation?

  19. SPECTRE of Deflation says:

    MS, agree completely. Rubin and Paulson with fellow former GS individuals are running the whole damn thing. I believe it goes to the heart of who is really running everything, and it sure as Hell isn’t our elected officials who look the other way at every occasion. Sickening really!

  20. michael schumacher says:

    If BSC assets were “performing”-as the clueless Fed Head said- then why were they not liquidated??

    No one can ask that question on the committee???

    We are so screwed……Mexico here we come.

    Ciao
    MS

  21. SPECTRE of Deflation says:

    In 1995 they changed the Reserve Requirements, in 1999 the did away with Glass Steagall and in 2005 we had the Bankruptcy laws changed to protect the playas after they had allowed everyone to borrow up to their eyeballs. If I didn’t know better, I would call it conspiracy but that can’t happen in America right?

  22. SPECTRE of Deflation says:

    I know understand that Dodd has upped the ante to $400 Billion on helping homeowners who should never have qualified for the homes they bought. They allowed BSC to fail before bending over and kissing every other playas arse with whatever is needed. This smells to high Heaven.

  23. michael schumacher says:

    And no Paulson at the committee??

    “Trip to china planned months ago”

    He’s been responsible for all of this bullshit bailout(s) and he can’t even answer a few questions??

    The hubris on display here is truly staggering.

    Ripping us off and smiling the whole time.

    MS

  24. SPECTRE of Deflation says:

    Barry, everything was securitized so nobody knows who the lender would be. It’s why Deutsche Bank keeps getting hammered every time they go to court. The shit paper was sliced and diced until it was damn near impossible to figure out who the lender would be. They want to give Judges the power to change mortgage agreements which is unconstitutional. We are in deep trouble.

  25. Advsy says:

    Places like Stockton Calif. are facing some of these issues already from a city planners perspective.

    The entire city is having to deal with slum like issues because the large number of abandoned homes are spread out over the entire city. So, even though it may be only 2 homes per block the effect on the neighborhood is close to what it would be if it was most of the homes on the block.

    Okay now, everyone who thinks that the bottom is in on the housing stocks, I have some Bear Stearns stock priced at the low low price of $60/share just for you. :)

  26. SPECTRE of Deflation says:

    MS, he’s in China asking them to buy more MBS. LOL! Ya can’t make this stuff up. Not one person has asked how the FED did this in the first place. There charter gives them no right to do the things they are doing. They can hold paper no longer than 6 months and that must be backed by argricultural commodities, yet they set up a 10 year LLC. Are you kidding me? What has happened to our Representative Republic folks?

  27. Bill says:

    Detroit homeowners have figured this one out.

    Once the abandoned home is occupied (by the homeless, or worse), call the police to roust them out, then go back in the middle of the night and torch the now vacant house.

    Eventualy the city will clean up the debris and you’ll have a nice “side lot” instead of a crack den next door.

  28. David in NY says:

    If nobody’s paying taxes, the local government gets the property. Is that so hard? I guess the bank could pay taxes and do no upkeep, but what’s so unusual about that?

  29. michael schumacher says:

    Sign of things to come:

    http://www.examiner.com/a-1318196~Corona_games_called_by_darkness__copper_wiring_for_lights_stolen.html

    but remember it’s all contained…..

    Ciao
    MS

  30. SPECTRE of Deflation says:

    Maybe this is why there was backslapping all around while the taxpayers were taken to the cleaners:

    CHRISTOPHER J. DODD (D-CT)
    Top Contributors

    1
    SAC Capital Partners
    $319,800

    2
    Citigroup Inc
    $318,394

    3
    United Technologies
    $268,800

    4
    Bear Stearns
    $205,100

    5
    American International Group
    $204,678

    6
    Royal Bank of Scotland
    $186,150

    7
    Goldman Sachs
    $176,600

    8
    Morgan Stanley
    $155,000

    9
    Credit Suisse Group
    $154,050

    10
    Merrill Lynch
    $141,650

    11
    St Paul Travelers Companies
    $117,100

    12
    General Electric
    $115,650

    13
    Lehman Brothers
    $115,000

    14
    National Westminster Bank
    $114,800

    15
    KPMG LLP
    $114,300

    16
    Deloitte Touche Tohmatsu
    $108,000

    17
    Hartford Financial Services
    $103,500

    18
    Travelers Companies
    $101,900

    19
    The Hartford
    $99,750

    20
    JPMorgan Chase & Co
    $98,550

  31. Francois says:

    “They want to give Judges the power to change mortgage agreements which is unconstitutional.”

    Says who?

    Changing mortgage agreements are standard practice in business matters when it comes to court for potential foreclosure. Pray tell why what is good for the goose isn’t so for the gander?

  32. Barry,

    A number of years ago, there was a case in a suburb of Toronto (not the US, I know) where an owner had used a patch of remaining farmland to dump refuse from his mostly illegal waste hailing business. When he was jailed, for this and a wide variety of other things, and went bankrupt, the mortgage holder refused to take back the property because they would have been responsible for the cleanup costs. I don’t, without knowing the final outcome, believe there was any problem with this.

  33. Francois says:

    Barry,

    I wish Tanta from Calculated Risk could shed some light on this whole thing.

    (just a suggestion…)

  34. Stuart says:

    That list pretty much says it all. Explains absolutely succinctly why Dodd was guzzling the kool-aid during his opening remarks this morning.

  35. Rebecca says:

    From what I understand, mortgage lenders have the right to approach borrowers with crappy houses at any point and demand they fix them up. I mean, the banks are the true owners (or co-owners) anyway. So, I’d be happy to see the industry being more proactive and preventing non-fully-owned owmes from becoming crappy in the first place! If that happened, the view out my front window might be a little nicer…

  36. SPECTRE of Deflation says:

    “They want to give Judges the power to change mortgage agreements which is unconstitutional.”

    Says who?

    Changing mortgage agreements are standard practice in business matters when it comes to court for potential foreclosure. Pray tell why what is good for the goose isn’t so for the gander?

    Posted by: Francois | Apr 3, 2008 12:39:22 PM

    Here’s your answer, and google is your friend. Judges currently don’t have the powers that some in CONgress want to give them:
    ____________________________________________
    The package is not expected to include a measure sponsored by Majority Whip Durbin that would change bankruptcy law for owner-occupied homes in foreclosure, giving judges more leeway to change the terms for the mortgage.

    Under the Durbin measure, if a homeowner owed $200,000 on a house now valued at $150,000, the judge could write off the $50,000 difference as secured debt that the lender could not recover.

    Banks contend the Durbin provision would raise the cost of mortgages because investors would be unsure whether they would be able to generate revenues on loans that they financed. It is likely to be voted on as a standalone amendment.

    The major question is over whether floor amendments will need a simple up-or-down vote for adoption or a filibuster-proof 60 votes, which would make adoption of the Durbin amendment unlikely.

    Republicans are pushing for a 60-vote threshold to ensure that the Dodd-Shelby substitute could not be tinkered with before a final vote.

    If the Durbin amendment fails, the Senate is likely to approve a competing measure by Judiciary ranking member Arlen Specter that would allow a judge to readjust interest rates and waive prepayment penalties, but not restructure the principal of loan. Banks have less opposition to the Specter measure.

    The negotiations also might involve a final deal over the FHA mortgage insurance program. The House and Senate have both passed their respective measures, but negotiations have been stalled over how much to raise loan limits.

    In the beginning of the year, FHA loan limits were set at $362,000. But the economic stimulus package raised the cap to $625,500. In addition, limits in some high-cost areas were allowed to increase to almost $730,000 under the bill.

    House Financial Services Chairman Barney Frank has been a proponent of raising the cap, especially in high-cost areas such as California and Massachusetts. Shelby opposes such a large increase, saying “it only affects a few people.”

    Sen. Mel Martinez, R-Fla., suggested Tuesday that both parties split the difference and set the limit at $500,000.

    “If we could do that [it] would be good,” Shelby said of the FHA bill. “If we can’t, then we are in a conference on that.”

    Now’s the time to call your senator to tell them what bankruptcy provision — if any — you want in the bill, and where you want the FHA loan limit cap set.

  37. wally says:

    Bill,

    Painful as it may be to recognize reality, that “Detroit” solution is probably the best. These things are absolutely not worth the fix-up price and left in place they are a hazard. Get rid of them so that maybe someday there can be a fresh start.

  38. gc says:

    Green Machine refers to imminent domain. This would be impractical and expensive compared to condemnation orders, at least under our state’s statutes. Imminent domain contemplates paying the owner something, while condemnation could take the property and stick the clean up cost to the owner/bank. I otherwise didn’t see reference to condemnation in the first 34 comments. There is a hitch; it does call for a capable and functioning local government, both administration and courts.

  39. DonKei says:

    “…It does call for a capable and functioning local government…”

    Oh well, so much for that idea.

    Holman Jenkins of WSJ says we should just start bulldozing houses–how about starting w/ REO’s in say, Detroit.

    Even in my hometown you can find whole lists of REO’s offered for less than $50,000, and our economy is otherwise doing okay, for now.

    By the way, you can’t just modify mortgage contracts in foreclosure proceedings. Bankrupty, yes, foreclosure proceedings (which are governed by state law), no.

    The constitutional point is as almost as old as the principle of judicial review.

  40. donna says:

    Just wait for the CRE crash to get going….

  41. SPECTRE of Deflation says:

    By the way, for anyone who wants to see where each CONgressperson gets their graft, I mean campaign contibutions, go to opensecrets.org.

  42. Steve says:

    Reminds me of the movie Suburbia. Is that where we’re headed?

  43. Tom M says:

    Rebecca, the bank is the mortgagor not the owner or co-owner. Yes, they can try to get the owner to keep the property in good condition as well as insured with the taxes paid. These aren’t properties were the owner much cares about complying with any of the terms of the mortgage.
    Congress, if they fix anything, is going to want to fix the IRS provisions regarding debt forgiveness. if the bank reduces he loan principal by say $50.000, then the homeowner has that amount of income on which tax is due.
    That Catch-22, that’s some catch.

  44. Fred says:

    Regarding a banks reluctance to take possession of a pre-REO which has been abandoned is more of an issue for shareholders. if the bank is public, then obviously, you’ve got a greater degree of scrutiny that would be exhibited on management’s decision not to maximize the value of the bank’s assets. there are perfectly good business reasons to stall but the real issue is related to fiduciary responsibilities. looks like the opportuntiy funds are pricing the harder hit areas at about 20% of cost. Note the recent Farrallon/Greenfield acquisition of Centex land inventory in AZ.

  45. Dandadan says:

    As a broker in the Inland Empire, CA. I can see the problem being created by the large scale abandonment of homes. Increasingly, I am approached by homeowners who have lost all of their equity, and are upside down in the property by hundreds of thousands of dollars. These are individuals with good jobs, and income, unlike the first wave. They are simply packing up, moving out and leaving the property fallow. The lenders are foreclosing more and more slowly, and more and more selectivly.

    Lenders are cherry picking the properties they put on their books and dragging heels on the ‘trashed’ properties (estimated to be about 50% of the REO’s). I know of homes that have been in default for nearly 2 years that are in limbo, no one can purchase them, the bank is not completing foreclosure so the properties become increasingly decrepit. Many of these homes should be bulldozed to decrease the size of the market as increasingly the homes are stripped of fixtures, plumbing and wiring. Without a large scale government intervention, I feel that we are in for a dose of signifcant social upheaval not seen in our lifetimes. People are terrified, ashamed and lost in this abyss. We must stop the talk and have action now, lest we leave a legacy to our children of little hope.

  46. Paul in NYC says:

    Dodd heads the banking committee so he has always been in good with high finance, and he is also a representative of Fairfield County, etc… so he is likely to negotiate terms favorable to maintaining the real estate bubble prices and profits to the profiteers. He also, as a liberal Democrat, instinctually throws a bone to his constituents, but he clearly has his feet in both camps. He’s a generally good guy, but I think he has got to step away from the Wall St. kool-aid and recuse himself from this situation.

  47. DavidB says:

    Not one person has asked how the FED did this in the first place.

    Posted by: SPECTRE of Deflation | Apr 3, 2008 12:23:38 PM

    That’s because the media hasn’t told people to ask that question yet.

  48. deflator mouse says:

    Bernanke, Paulson, Cox, and Geithner:
    The Four Chairmen of the Apocalypse

  49. Paul in NYC says:

    Oh, and alarmingly, to me as a Democrat, Barney Frank is in this with him all the way. Damn we are hosed.

  50. TimF says:

    It seems like a bug in the foreclosure process that this is possible. Foreclosure should result in a clear title to the bank. Otherwise what exactly *is* foreclosure ?

    The other thing that seems strange is that the banks wouldn’t keep these properties on their books at the value of the note (at the cost of property taxes) to shore up their reserves.

  51. Roger Bigod says:

    Todays Finance Concept: jingle property taxes.

  52. MNPundit says:

    So who owns the house then? Can someone in theory, just set up camp there and after the statutory period claim it?

    If property values are low, doesn’t that mean the property taxes are also lower?

    How long before the Corrupt Wall Street Worshippers (The GOP, select Dems) tries to pass a bill FORCING people to pay back the loans if the lenders don’t want them?

  53. BostonObserver says:

    Good piece in The Atlantic on this topic:

    http://www.theatlantic.com/doc/200803/subprime

    At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”

  54. Jon H says:

    I’ll say one thing – these houses would be okay for people whose work is not location-dependent.

    The home might not appreciate in value, but it would probably be cheaper than renting, and would provide more garage startup space than an apartment.

  55. Spartee says:

    Ah, with all this End is Nigh talk, without any leavening optimism at all, that surely means to contrarians that the bottom is near.

    Of course, the End really could be Nigh….

  56. donna says:

    BR, you’ve been boing boinged!

    Ought to be a heckuva traffic spike today….

  57. Torching houses to acquire a lot – reminds me of the late 70s in NYC on the Lower East Side (and the Bronx and Brooklyn, too). I lived on a block east of Avenue A in which two tenement buildings were torched and razed. Many more were torched and boarded up throughout the neighborhood. THe boarded up buildings became mega-heroin markets, with lines of buyers out the door. The cops stayed away. In all, like a bad movie; when Brazil came out later it seemed they’d used my neighborhood for stage set ideas.

    Razing a building was an improvement – guerilla gardeners or local Puerto Rican social clubs would move in and green up the site, creating little parks in the middle of the chaos. They grew food, too.

    Now thirty years later the area is so expensive only trust fund babies and Wall Street players can afford to buy there.

    Don’t know if this is in the cards for Detroit. But it seems ripe for young adventurous urban permaculture hippie/rasta homesteaders. Just start farming the lots.

  58. Joe says:

    I agree with the idea of bulldozing the property. Most of these homes were slapped together as fast as possible and are going to be falling apart anyway.

  59. Chris says:

    Absolutely agree with those who say raze the buildings and create more greenspace. Brilliant.

  60. OhNoNotAgain says:

    “Absolutely agree with those who say raze the buildings and create more greenspace. Brilliant.”

    Third (or fourth, whatever). They’re going to need those vegetable gardens once transportation costs start jacking up the price of shipped-in food so much that it’s virtually unaffordable.

  61. Keith says:

    Go to Buffalo, you will see endless streets of empty houses. It is not easy for a city or neighborhood to stabilize when the houses are empty.

  62. foo says:

    From a long term macro point of view, the build-out of exurbs always was unsustainable. That these are turning into slums already is an issue of timing. The overinvestment in unsustainable communities has accelerated the transition.

  63. Joel says:

    As someone who has worked in the mortgage industry, I believe that it is patently unfair to say that lenders should be held responsible for foreclosures. Government programs made it possible for large amounts of people previously afford it to buy homes. The government did everything in their power to encourage this type of lending. As a result, many people who were deserving were suddenly able to buy a home. An unfortunate side affect of this is that many other undeserving people took advantage of the generous terms of the government’s offer. I can testify from personal experience that it is impossible to tell if a person will pay or not. You can look at their credit scores or listen to what they say, but in the end all you have is a very fleeting impression of how that person behaves when they are over their head and terrified.I have no doubt that this is not the reason every one of these homes has been foreclosed on. There are many unscrupulous lenders. However there are at least as many legitimate lenders who try their best to make good loans. Holding these peoples defaults against them only reduces the responsibility of the many many people who took advantage of the system. Also most mortgage companies levy penalties on lenders for every mortgage they make that defaults.

  64. Dr. Kenneth Noisewater says:

    “Go to Buffalo, you will see endless streets of empty houses. It is not easy for a city or neighborhood to stabilize when the houses are empty.”

    The sad part is, Buffalo could be a HUGE success again (leveraging its higher education, border trade, etc), except for the taxes, party machine and corruption.. Too bad NY is such a high-tax horrorshow to do business in :(

  65. Matt R. says:

    I would be shocked if simply not taking title, after going through the foreclosure proceedings, would releive them of liability for what happens on that land. Fine, they don’t pay taxes, etc. but let’s just see when someone gets hurt on the land, or it becomes dangerous or a blight to the community. I wouldn’t be surprised if this comes back to bite a few people in the rear!

  66. foo says:

    If the bank does not take the title. Who has it?

    Can the bank turf out the delinquent borrower before they take title? That is odd. Perhaps people in foreclosure should make sure the bank has taken title before leaving.

  67. P. K. says:

    Here’s a related con also perpetrated by Wall Street. The money center banks, in cahoots with local financial advisors to school districts, concocted this scheme to exploit those districts that have cash flow problems. The banks provide cash to the districts (thru HIGHLY complex derivative instruments), and in return the banks get huge fees, along with the advisors who are supposed to be giving un-biased advice to the local school boards—a clear conflict of interest. To top it off, the instruments are structured, thru the banks’ sophisticated software, so that the banks seem to win either way while the low level bureaucrats buying these things don’t have much of a clue. http://tinyurl.com/2gfkes

    Ya gotta love that they specifically targeted rural districts, with (presumably) less sophisticated bureaucrats to fleece.

  68. KenB says:

    Mortgage lenders are in business to make money. They are not a public utility. Merely because they made a bad decision in extending credit is no basis to compel them to compound the problem by taking title to a problem property. When you are in a hole, stop digging. That’s all the lenders are doing. I see no justification to expect anything else from them.

  69. A.S. says:

    I don’t get it. Why are the properties vacant? The defaulting borrowers still have title, and therefore still have the right to quiet enjoyment. Why did they move out?

  70. HoiPolloi says:

    It seems like there ought to be a cap for how long a lender can drag their feet — either go into forclosure or turn the title over to the local authority to decide what to do with. While I can see the logic of the bank stalling for time, they are able to do so at the expense of the community which has to carry the cost of vacant homes “on the books,” so to speak. It’s a loophole that hshould be closed amongst all this “bailout” talk.

  71. SPECTRE of Deflation says:

    Paul in NYC, LOL!, hosed we are me thinks as well! We are dealing with corruption at every frigging level from both groups. If 5 hours of testimony today didn’t prove they are clueless, liars or both, nothing ever will. The Joint Committee yesterday was as bad if not worse. Hell, even Ron Paul babbled. This was his chance to nail their asses on Constitutional grounds, and I’m still trying to figure out what the heck he was trying to ask. Did I mention we are hosed? LOL!

  72. Dsinope says:

    If no one is paying the property taxes, they should belong to the city.

    Auction them. If the buyer doesn’t pay the taxes, take them back and auction them again. SOME of these places will attract owners who like the idea of getting a house for $100, and will live there.

  73. K says:

    It is the maintenance of the house and neighborhood that matters. An empty house may be vandalized or occupied by squatters. In the absence of complaints to the police there is no crime reported.

    Ownership depends upon local law. In some places the lender owns the house until the loan is paid. In others the borrower owns the house but it is security for the loan.

    When default occurs the lender may decide to ignore the situation. The home will be sold for taxes after a few years and all prior claims vanish at that point.

    The real difficulty is the period before the tax sale.

    Someone is liable if there is an injury on the property, even to a trespasser. And run down properties decrease the value of homes nearby. So civil suits can be filed against the borrower and the lender and the homeowners association (if any). These civil judgements won’t depend on who owns what, the jury merely has to say who is responsible.

    I favor putting more responsibility upon the lenders. How else will they ever be restrained from making reckless loans?

    The gist of the matter: Bankers can’t legally buy lottery tickets with depositors money, but they are well paid for lending almost any amount on any real estate scheme.

  74. Neil B. says:

    Such abandoned homes should be required by law to be put in the hands of homeless or otherwise needy prospects.

  75. wunsacon says:

    >> I believe that it is patently unfair to say that lenders should be held responsible for foreclosures.

    Pfhthfthfth! (Hold on while I wipe the water from my screen.) Help me, Jeebus!

    Sorry, Joel, but here are my questions:
    - Did the government FORCE lenders to offer no-doc loans?
    - Did the government FORCE lenders to eliminate down payments?
    - Did the government FORCE lenders to continue lending in bubble areas where affordability was clearly stretched by early 2005?

    Corporations have far better resources than individuals. And so they should perform even better. Barry and other bloggers pointed out the risks by 2005 (when I started reading) or even earlier. Corporate lenders *must* take “personal” responsibility for their actions!

    Unfair??!?

    I agree government IS a big part of the problem. But, they didn’t force ANYONE’s hand.

    Since you work in the mortgage industry, the people you should blame work in the cubes around you — and especially the slicksters in the corner offices. Whatever their bonuses were for the past 4 years, that’s unearned income.

    Sorry to be harsh. But, that’s the facts as I see them.

  76. wunsacon says:

    Is “imminent domain” like “eminent domain” but just “a lot faster”?

  77. bc says:

    First a couple million Mexicans aren’t allowed to show up as planned. Then the fuel cost of commuting into the rich areas to work for the rich people quadruples. Now you have Mexicans doing what I’d do, ripping copper out of abandoned homes to survive. This is like the dark ages when they burned the Roman statues to make lime for the fields.

  78. mrsizer says:

    Are we on different planets?

    What about the people who took the loans? It’s not as if they were forced down peoples’ throats.

    I’m GLAD of the easy terms. I took out a very large 15 year loan at a good interest rate with a mediocre credit score. I’ve been house-poor for 5 years. I’m a terrible saver, so I figured a good savings plan would be home-equity. Real-estate, historically (I remember the 1980s), has not been a great investment, but it beats not saving at all. This mess will be long over in ten more years.

    I plan on staying here at least until the mortgage is paid.

    If people make stupid decisions, it’s their problem. That includes lenders – they should take responsibility for properly disposing of assets they don’t want.

    But just walking away from a loan? That should give you a credit score of zero for the rest of your life. Negotiating a fix, declaring bankruptcy, even just writing a note to the bank saying “I’m done” I can accept. Walking away? No. It’s wrong. I can’t see how that’s even open for debate.

    By the same criteria, the lender cannot simply walk away or ignore the problem. Dumping the property on the local government is also evading responsibility: The taxpayers must deal with the mess. If the lender wants to bulldoze the house, fine. But they must be made to pay for it.

    BTW: For all of you complaining about the government: We elected these people to represent us, we need to live with their decisions. You don’t like them? Run for office yourself. (Frankly, I’m amazed that, given the amount of complaining, people still want to put them in charge of healthcare – they’ve done such a wonderful job of regulating financial markets.)

  79. Apt604 says:

    “Here’s your answer, and google is your friend. Judges currently don’t have the powers that some in CONgress want to give them:

    Banks contend the Durbin provision would raise the cost of mortgages because investors would be unsure whether they would be able to generate revenues on loans that they financed. It is likely to be voted on as a standalone amendment.

    Posted by: SPECTRE of Deflation | Apr 3, 2008 12:54:13 PM”

    SPECTRE, do you really believe the industry’s media talking points on this? They don’t mention that Durbin had already re-written the bill so it only allowed bankruptcy for loans that have already been made (not future loans), and only for loans are otherwise going to fail.

    Future mortgages are going to cost more no matter what, because years of stupid lending have led to massive losses and a credit crunch. In the midst of this mess that it created, it’s totally dishonest for the industry to argue that a law requiring the salvaging of existing, failing loans will drive up the cost of loans in the future.

    As Tanta once suggested, maybe lenders wouldn’t have to worry about bankruptcy losses if they were more sensible with their lending standards in the first place.

  80. wunsacon says:

    >> BTW: For all of you complaining about the government: We elected these people to represent us, we need to live with their decisions.

    Or we need to vote for more competent ones and live with better decisions.

    Stop voting for people who replace “tax and spend” with “borrow and spend”. And who repeatedly claim “government can’t do a good job” and then prove it once elected.

    Stop voting for people who use bullshit issues like gay marriage as a wedge issue.

    And tell friends not to vote for them either.

    >> (Frankly, I’m amazed that, given the amount of complaining, people still want to put them in charge of healthcare – they’ve done such a wonderful job of regulating financial markets.)

    It’s the *de*-regulation trend of the last 20 years that got us into this financial mess. Sure, we still have items like the FDIC around. Sure, this wasn’t exactly laissez faire. So, let’s go back a few decades before all these FDR measures “spoiled” America: do the 1920′s have anything to teach us about laissez faire? How about the Grapes of Wrath?

    As for healthcare, yes, it’s a mess. The first people you see in the door are a cadre of billing people. Pharma spends more on marketing than on research, which relies in part on taxpayer research. And the FDA is too cozy with the companies, which is how we end up with suppressed case evidence. We don’t necessarily need more regulation. Just smarter regulation. Evolutionary changes. More transparency.

  81. Sean says:

    Calm down folks. Step away from the bomb bunker. Are people really advocating the destruction of perfectly good housing? Simply doze the houses and then rebuild them, thus wasting twice the amount of resources? With talk like this, we really could be in for a crazy couple of years.

    Banks, given the right nasty market fundamentals, will sit on properties before taking them back, but if they fail to pay taxes the houses eventually get sold at tax sale. If no one shows up to sale, the city/county/whatever takes the house. Local taxing authority has priority over all other liens, kids. Basic tax-sale theory. Pretty simple really. Don’t know why a bank would let that happen if they could salvage a few dollars by a hard fire-sale, but there you have it.

  82. kevin Crawford says:

    You know lost in all this is this question: What does it do to the neighborhoods? Well I can tell you, because I have 2 foreclosures right in front of me. In one situation, the back does not give a crap about the house. I know this because I was so sick of looking at the endless weed problem I went out and sprayed them myself. My neighbors jerredd me for finally cleaning up the yard, not realizing I was not involved with the ownership of the house. The other one I thought was going to pot until I noticed a pool guy come by and I asked him who was paying him for his services. He says ” a firm out of Bullhead City”! That’s 250 miles away. But at least they have the decency to actually do the work and maintain the house. In all you academic discussion and finger pointing, you may want to ask, what is it really like to live in a neighborhood where houses are being abandoned? Let me chime and say it is not a pretty picture. Just something to think about from far away Gilbert, Arizona.

  83. SPECTRE of Deflation says:

    “Here’s your answer, and google is your friend. Judges currently don’t have the powers that some in CONgress want to give them:

    Banks contend the Durbin provision would raise the cost of mortgages because investors would be unsure whether they would be able to generate revenues on loans that they financed. It is likely to be voted on as a standalone amendment.

    Posted by: SPECTRE of Deflation | Apr 3, 2008 12:54:13 PM”

    SPECTRE, do you really believe the industry’s media talking points on this? They don’t mention that Durbin had already re-written the bill so it only allowed bankruptcy for loans that have already been made (not future loans), and only for loans are otherwise going to fail.

    Future mortgages are going to cost more no matter what, because years of stupid lending have led to massive losses and a credit crunch. In the midst of this mess that it created, it’s totally dishonest for the industry to argue that a law requiring the salvaging of existing, failing loans will drive up the cost of loans in the future.

    As Tanta once suggested, maybe lenders wouldn’t have to worry about bankruptcy losses if they were more sensible with their lending standards in the first place.

    Posted by: Apt604 | Apr 4, 2008 1:39:44 AM

    Link please! By the way, the senate killed new bankruptcy provisions in the Housing Bill. Bankruptcy judges cannot write down mortgages. Period and end of story unless congress authorizes it.

  84. timjowers says:

    How it works is the lenders refuse until it goes to tax sale. Then they file the foreclosure (or master in equity) at the eleventh hour. This way they can stick it to whoever buys the tax bill/tax property. The very fact the tax taking only occurs after 5-6 years means this housing debacle is only just begun. You’ll see how little the lenders actually know about vandalism though. Just don’t be a sucker and buy a tax sale property. I was and got burned big time. I suspect a similar story is true with foreclosures. E.g. are “liens” eliminated? Doubtful from what I researched.

  85. “Reluctant Banks” Let Defaulted Borrowers Stay in Homes

    Yesterday, we discussed Lender-Abandoned, Non-REO Foreclosures. That started a robust discussion, leading to a follow up piece by Bob Ivry of Bloomberg: Lenders Buried By Foreclosures Let Late Borrowers Stay in Homes. According to Ivry:Banks are so ove…

  86. D Palmer says:

    You know what happens when a bank acquires too many REO’s? They are subject to criticism from the regulator. Access to the discount window and Federal Home Loan Bank can be restricted and requests to acquire competitors or expand can be denied.

    The idea that Banks would fail to take title to property simply to avoid taxes and insurance is laughable. If the property is in reasonable condition it is almost certainly reantable for an amount sufficient to cover these costs plus earn some small return on the tied up principal.

    If the government wants to do something positive, instead of bailing out irresponsible borrowers or irresponsible lenders they could instruct the regulators to provide banks with more flexibility to hold properties until values stabilize and they can be liquidated in an orderly fashion.

  87. Michael Liggan says:

    Pardon if I missed it in the postings, but when would be debt have to be written off in the described foreclosure situation? If the interval resulting in tax taking is prolonged (e.g. years), can the lender carry the assets on the books until a more convenient time. Presumably, the lender is not paying the taxes, so no negative cash flow.

  88. Paul in NJ says:

    “At one end you have people selling at a loss of walking away from their ARM’s…”

    That whole ARM thing is moot: as the Fed has pushed down rates, many ARM borrowers won’t see the huge rate increases that were forecast. Some may see a *decrease* in their payment.

  89. Paul in NJ says:

    “If BSC assets were “performing”-as the clueless Fed Head said- then why were they not liquidated??”

    Um, because no one wanted to buy them. Bear, and the rest of the system, froze up because the system faced a LIQUIDITY CRISIS. When no one can properly assess the value of an asset (which began in the subprime mortgage market and then spread), that’s what happens. The Fed (which has far more of a clue than you) stepped in to inject some much-needed liquidity.

  90. Paul in NJ says:

    wunsacon asks: “I agree government IS a big part of the problem. But, they didn’t force ANYONE’s hand.”

    Three words: Community Reinvestment Act.

    Of course that’s not the entire cause, but it certainly was a contributing factor. How do you suppose we got to a homeownership rate of 67%?

  91. Larry says:

    Cities should seize these properties for non payment of taxs and sell them to people cheap on the condition that they will actually live in them. People still don’t get it, the problem is not too much housing, its lacking of housing that people can afford. Why let these places rot when your teachers, fire, police, and trash collectors are forced to rent?

  92. If the lender’s don’t take back the properties, and no one is paying the property taxes, the local governments can sell the houses at tax foreclosure sales.

    This has always been one of the options to steal homes from people who have paid off their mortgages in full but can’t pay the yearly government rent.

    Have local governments done this in such large volume with bank-owned properties? I don’t know about that, and taking back the houses from the first foreclosure may not make the lenders happy.

    But counties will keep foreclosing on houses that have not paid their property taxes. It doesn’t move as quickly as mortgage foreclosure, but maybe they’ll start to pursue them a little more aggressively. Either that, or turn the suburbs into outlying slums.

  93. Apt604 says:

    “Link please! By the way, the senate killed new bankruptcy provisions in the Housing Bill. Bankruptcy judges cannot write down mortgages. Period and end of story unless congress authorizes it.

    Posted by: SPECTRE of Deflation | Apr 4, 2008 10:17:32 AM”

    Here’s what Tanta had to say:
    http://calculatedrisk.blogspot.com/2007/10/just-say-yes-to-cram-downs.html

    Yeah, I know bankruptcy judges currently can’t write down mortgages. That’s the whole point of the legislation.

    It’s a shame the industry killed it in the Senate. Perhaps it prefers foreclosures and “jingle mail” to cramdowns? In a lot of cases, those are gonna be the only alternatives.

  94. Cal Gal says:

    Sounds like the lesson is, if the bank forecloses, keep your keys and keep an eye out.

    If the property is not listed for sale, move back in. With no one having title, who will tell you to move? In some state, if you pay the property taxes (and without a change in title, the tax bill will probably still come to you), you DO get the property eventually under a theory called “adverse possession.”

    Also, many “mortgages” are “deeds of trust” and once you’re taken off the title, the “ownership” defaults to the holder of the deed of trust, so the property taxes could go back to that person.

    This whole thing just does not sound “real.”

  95. VDPSC says:

    I’ve read that banks are not allowed to own real estate unless it is in the commission of doing bank business. ie bank branches etc… Therefore they have to get it (foreclosures) off their books. This may explain why they are leaving some foreclosures in limbo. It functions as another tool to help them manage how much property is on their books when the regulators come. I am sympathetic to people losing their houses. I think lenders should be allowed to rewrite terms of loans to let homeowners keep thier homes. I dont want my tax dollars to bail out everyone. Let the lenders figure it out. Also lenders banked on properties going up in value and screwing over a few people to make even more money. As soon as someone misses a payment they are charging 500.00 fees for drive bys to insure occupancy instant fees of 2000.00 dollars for attorneys costs. I’ve read several stories of families off of work and missing two payments and their back payment is thousands more than what they are in arears for.

  96. Jay Dedd says:

    This approach is par for the course in New York City tax foreclosures. The City’s exclusive agent for the purchase of tax lien certificates – The Bank of New York (BoNY) – does exactly that when foreclosing: it becomes entitled to the deed in the foreclosure action but does not instruct the court to convey title. In effect, the bank sits on its high bid – in some cases for years – and when it eventually finds someone to buy the property, the buyer is actually buying the bank’s high foreclosure bid. Title to the property – having been in limbo since the entry of the foreclosure judgment – comes from the court. So much for the Bank’s civic responsibility … The important thing to note is that local taxes continue to accrue post-foreclosure, so anyone looking to buy a tax foreclosure property from a BoNY tax lien process needs to read the contract very carefully. It is possible that BoNY will shift lots of unpaid real estate taxes to the purchaser.

  97. Rose Spoltore says:

    Rose Spoltore
    “The wealth of this country lies in the homes of its people” Abraham Lincoln
    OUR NATION IS CRISIS—a clear and present danger!
    The Middle Class is Quickly Being Pulled into Poverty Level

    The Dollar is devalued and worth 60 cents.

    Americans are being terrorized by our own leaders in every level of government. Let’s not burn the flag…..but the traitors must be brought to justice. Who are these traitors? Read on….There should be blood on the street….there should be protests…..and yet the people continue to take it…….

    Increased unemployment—reported statistics are wrong—when someone stops collecting unemployment, the government considers them employed even if they do not have a job and what about employee buy-outs or people receiving entitlements, or welfare, etc. So, distorted information then becomes Public Perception then becomes reality!! Gasoline has gone up to almost $4.00 per gallon and fuel oil is at $3.86 per gallon. If nothing is done—it will take another 10 years for the Real Estate market to begin to stabilize—it always does!! THE SOLUTION IS SIMPLE AND WILL COST LITTLE OR NO MONEY!!

    Good morning…My name is Rose Spoltore. I live in North Attleboro, MA. I have been a Realtor for more than 33 years. I have seen several recessions….this is by far the worst….than 1989 and even 1981 when the interest rates were 19% fixed.

    A SPECIAL MESSAGE TO NAR (National Association of Realtors) We are 1.3 million Realtors across the Country who is facing declining property values – AND WE ARE IN A STRONG POSITION TO HELP. NAR does nothing. Our dues pays their comfortable salaries—their salaries are not based on commission. We have begun a “grass roots’ movement from the local levels to The National Association of Realtors and Washington to make these necessary changes. Yes, I am angry……very angry…..

    The Government creates the Boom and the Government creates the Bust. 1981-1984—recession—some people may debate the dates, the interest rates in 4/04 was 12 ¼%/30 yr fixed. 1985-1989 recovery and peak. 1989-1996—recession and recovery. Boom and peak 1997-2004. 2005-2008 recession and tough times are getting tougher.

    The year, 2008…..Today’s Crisis—I won’t get into the story of how we got here this time….or the sub-prime lenders and the names of the legislators in Congress that Approved These Irresponsible Programs.

    Property values continue to decline due mostly to foreclosures and short sales. I feel that getting the property listed and sold as quickly as possible at current market value, while the property is still occupied….

    Market value is changing day by day…”the reason”….THE INCOMPETENT MANNER AND POLICIES THAT LENDERS HAVE IN PLACE TO ATTEMPT TO DISPOSE OF THESE PROPERTIES and their abusive tactics to homeowners. Loan sharking has been made legal!! What is happening on Main Street across this Country is “a crying shame”— We Have a Nationwide Serious Problem Here. All the economists that I’ve listened to, I’m sure are highly intelligent people, but they are driven by statistics, and when statistics are skewed… then the policies have no substance…and what is wrong and untruthful, it then becomes “what the market will bear” and “supply/demand” economy. I believe in Capitalism and their many opportunities for so many. The Real Estate market and its many derivatives, as well as the stock market and the entire financial industry is at the mercy of a very few. Insider trading in the Real Estate and financial industry—of course!

    This is My story—every Realtor has one…

    I have been attempting to do a short sale locally with Countrywide Mortgage from Simi Valley, California. The people owe $329,000.. On August 26, 2007, I listed the property for $248,900. After doing a Market Analysis, and looking at all the options, we decided to do a short sale…“subject to the sellers’ lender approving the short sale and forgiveness of debt”. I immediately contacted Countrywide Mortgage. The automated phone system keeps you in a web of circles for hours, “we are attempting to collect a debt” and after many calls, I am directed to the “home retention department”. Why is it called a “home retention department when it is “anything but”. Anyway, I gathered all the sellers’ monthly income and expenses, hardship letter, and copy of the listing, bank statements, and an Authorization Letter for the lender to release information to me.

    And on September 4, 2007, I faxed them everything I had. THEY SAID THAT THEY COULD NOT DO ANYTHING UNTIL WE HAD AN OFFER. After two months of various methods of weekly advertising and many showings, I had no offers. We then decided to reduce it to $227,900. Again, many, many appointments….I received three written offers within a month…..the first one….no money down—this property is a two family—the buyer would qualify if it was a single family—but not a two family—“gee”, I said to myself….three years ago I had a buyer who closed on two properties; a three family and a four family with no money down…. the same week, and he had bought another, six months earlier with no money down!

    The second offer….the people got tired of waiting for Countrywide to make their decision after about three weeks…and the third offer was a cash sale…. the buyers waited and waited. Countrywide told me that they ordered the appraisal…Ok, we should know in a few days…I received a call from two separate Realtors…to look at the property….I thought they were going to do the BPO, Broker Price Opinion…..oh…no…their job was simply to take interior and exterior photos and then they would e-mail them to McCaffrey Properties, LLC from Cicero, New York. All this for $20.00 TWENTY DOLLARS. They then would do an “Internal BPO”…OK, how can they do an “internal BPO”….that’s like a Doctor doing “an internal” on one patient and diagnosing another patient with that information. What do they know about Attleboro? In fact, they do not have a telephone number or an address on their web-site. The only way I was able to reach them is by fax, saying that I am interested in doing work for them. They e-mailed me back with their phone number. Are these people real estate appraisers….lawyers, investors, organized crime or what?….and even a Real Estate appraiser cannot do a proper job without being familiar with the neighborhood…and “the local market place”.

    After 5 months, the “negotiator”, came back with a counter offer of $307,500.00. “These people must be on something very strong and illegal”! “This property will end up in foreclosure, abandoned and in eight months, it will be worth $100,000. or even less….in the early ‘90’s, bank owned properties similar to this were selling for $25,000.-$40,000.” I heard that it generally costs the lender $65,000. to go through a foreclosure auction.

    The people who were in charge in the late 80’s and early 90’s— did a great job—at least you could talk to the people who could make the decisions—now “they keep spinning you around”! There is no direct line, no direct fax, and no direct e-mail with the negotiator. The person that finally answers the phone—I’ve spoken to at least 12 of them…will then e-mail the negotiator and then you have to wait for him/her to call you back. WHY ALL THIS SHIELD OF PROTECTION and alienation….and “the beat goes on”. And this is called the “Home Retention Department.”

    After heavy discussions with Countrywide, they agreed to send a third person to the property. This time they sent a local Realtor to do a BPO. Another two weeks went by…..I get a second counter offer of $268,500 and they gave me a list of documents that they still wanted… 90% of them, I had already given them on September 4th, such as the hardship letter and Authorization letter, but they could not find it….

    A little angry with Countrywide, I called the seller…she came in the following morning at 10:00AM. to help put together the rest of the documents that was required, 32 documents (numbered 1-32kl) with a cover sheet indexing and explaining each page. I began to fax to Countrywide from 12:30PM-2:30PM – could not get through. I then called Countrywide and was told that they had one fax line…..I said, “what!… you’ve got one fax machine when you are servicing thousands of properties each day.” Oh, we have lots of fax machines, but only one dedicated line!” “It’s the same thing,” I said…..I’m reminded of the Comcast digital phone commercial…..”Sir, your leg is going to fall off unless you change the dressing or something to that effect.”

    I decided to go to the Post Office and Overnight the package, $16.25, with all the documents on 1/10/08. A few days later, I went on-line to track it. They received it the next day at 1:28PM and signed by S. Edwards. About a week later, I called them: They didn’t know where the package was…I told them that S. Edwards signed for it…they did not know who S. Edwards was. “There are a lot of people who work here!”, I was told “Yeah, but do they do anything?”, I said.

    On 1/28/08, they still did not have the documents. I called the Realtor who did the BPO, “by the way…what value did you come up with that property that you did the BPO on”? “I don’t have the file in front of me….but I believe it was around $225,000”, was the response. Mind you, at this time, I DID NOT TELL THEM THAT THE FIRST TWO OFFERS WERE DEAD, otherwise the process would have stopped right then and there….and as of now…the cash buyer can no longer wait….

    In all seriousness…..IT IS VERY SAD WHAT IS HAPPENING IN THIS COUNTRY….If these properties are not disposed of in a timely manner…inventories continue to build…and regular sellers cannot sell-–property values continue to decline, and decline.

    Short Sale

    When people are upside down on their mortgage, they cannot refinance or sell it. Any new loan is driven by credit scores, appraisal, and verifiable income. It is interesting that in the last few years, with such a boom, people refinanced, pulled money out….and now with no more money to pull out, people aren’t spending as much….as is now being reported. But more important—many of these sellers have borrowed from family members to try to keep up the payments…high cost of goods and services and less monthly income…it then spirals out of control….there is no way out. One client has borrowed money from her 90 year old parents to help with the mortgage.

    Foreclosure

    When the lenders have taken possession of the property, the property is now abandoned and in disrepair. This requires a CASH BUYER. A three family that originally sold for $289,000., now vacant and condemned by the City, is listed at $135,000. My buyer offers $50,000. The bank refused the offer. The buyer in checking with his lender was told that if the property was condemned, they could not do the loan. When I told the buyer that it had to be a CASH sale, he said, “Offer them $10,000.00”!!!!!! On a Bank Owned property, we have one buyer who is ready to close and has been waiting 2 months for a Purchase and Sales Agreement to be signed by the bank! He has credit scores above 800…Why is this happening?

    A fellow Realtor I am working with…she has four transactions that she has been working on for months and ready to close since November…has now been told by Wells Fargo that they will not close until February because they do not enough help to close these sales. This information was told to me the end of January, 2008. We have lots of buyers and we can’t close because the lenders who hold the loans are holding everything up. Multiply this issue with the 1.3 million Realtors across this country—YOU DO THE MATH…

    Another property that is listed for short sale—needs a new septic system—the bank won’t do it….eventually a builder/buyer will pay $80,000. at auction. When it was originally appraised and sold for $360,000., most likely, the bank will buy it back; keep on the market for two years and when it doesn’t sell because now there are frozen pipes, water damage and MOLD IN THE PROPERTY. Mold is “that green stuff that’s a big issue now- a-days” Was it safe 10-15-30 years ago?

    I believe…above all else, jobs and then the Real Estate Industry drives the economy. You can’t inject consumer confidence with false information.

    Forgive my simplistic view of the issues. I am a very simple person. I am not the Harvard Graduate, who came up with “different computer models” called sub-prime..and this created wealth for certain greedy investors on Wall Street, and from China to Norway. The high level of intelligence of the President and Congress, they created a monster with the infusion of sub-prime lending—“these mortgage backed securities on Wall Street were selling like “hotcakes”…Many countries (185 countries, members of the World Bank) invest and buy this bundled securities and hedge funds for huge profits. The incentive is lend as much money as possible on the street. People were making more and spending more money. “Abondanza” as we say in Italian. I am sure Mr. Mozillo knows what “abondanza” means. He’s got lots of it.

    The 7 step solution– A Presidential Initiative to Stabilize the Housing Market
    THIS MARKET COULD BE REVERSED IN LESS THAN A YEAR—WITH IMMEDIATE ACTION.

    1. A Coalition of Government, Lenders, HUD, FNMA, 1.3 million Realtors, MLS systems, Appraisers
    a. A Fair and Uniform Standard to process Short Sales and Bank Owned properties (FUS) thereby quickly selling these properties, preventing the continuing” free-fall of prices.”
    • Prevents the existing incompetent and lengthy process—no buyer will not wait 5-6 months for a decision from a lender—he has a signed purchase and sales agreement—during this time the value of that property has continued to drop.
    • This is especially important while the home is still occupied

    2. HUD—Laws should be reviewed and changed to allow a better market place for consumers.
    a. Allowing for seller 2nd mortgages, negotiated between parties a 6%- 8% without fear of fraud. Yet private investors could charge a 1st at 8.99% and the 2nd at 11.99% not long ago, with stated income.
    b. Investment Banking and Hedge Funds regulations must always be under careful watch….this is where the real fraud against all of us exists—at the highest levels.
    c. A 12 month “interim loan” for properties that are in disrepair—made available for owner occupied and non owner occupied. Rhode Island Housing and MASS housing programs and 203K have so many fees and restrictions that it either disqualifies or discourages so many buyers. CASH BUYERS brings the price lower.

    3. Realtors—A vital instrument — 1.3 million Realtors in this Country who are in a strong position to help— using his/her skills to work and coordinate with buyers, sellers and lenders.
    4. Upon listing the property and at first contact with “the lender”, the lender must then immediately order two BPO’s or Certified Appraisal of the property by local Realtors and Appraisers who have applied. They are most familiar with the local market and when an offer is presented, if there is more than a 90 day lapse—a time adjustment can quickly be made by the appraiser or the person who did the BPO.
    d. The Realtor immediately begins to prepare the package to send to the lender consisting of the listing contract, the authorization letter, bank statements, w-2’s, pay stubs, hardship letter, list of their monthly expenses and debts, etc.
    e. If the Realtor is directly involved with the listing, the BPO must be assigned to another Realtor.
    f. The lender negotiator must be properly trained and, if possible, have a Real Estate background. The Realtor, listing broker, must have direct communication with the Negotiator.
    g. The Negotiator MUST HAVE THE AUTHORITY TO MAKE IMMEDIATE DECISIONS and sign off, just “like an underwriter” for new loans,,, and sign documents….the investor must be made aware of the situation….and all the facts.
    h. Direct access to the negotiator by phone, fax, and e-mail is crucial
    i. 7 day DECISION turn-around for short sale and foreclosure decisions from when a qualified offer is presented—BY NOW ALL THE WORK HAS BEEN DONE

    We have buyers; they will not wait 6 months.

    4. MLS systems—BO (bank owned) SS (short sale) on the listing.—many may feel that it promotes BO/SS properties…on the contrary…it identifies these properties, they get sold quickly. When the positive results are reported in MLS, National Association of Realtors and the media, the buyers will gain confidence, continue to buy…. thereby stabilizing property values…. Many buyers have asked me for a list of foreclosed properties…..it is difficult so sort through 1265 listings in my surrounding communities.

    5. Lenders
    a. One satellite office in each state—servicing all lenders expediting processing the huge volume of Short Sales and Foreclosures—sub-letting space at existing bank location.
    b. Lenders to have two departments—When people call, they are immediately directed to the proper departments
    i. Home Retention—Should mean home retention
    One client, a single parent, has been negotiating with Countrywide for 9 months, has not been able to make mortgage payments on a loan of over $400,000.00. At the end of this 9 month process, they give her this option: $15,000. now, and continue your mortgage payment or we will go to foreclosure. She then called me for help. When she originally bought this house, the down payment came from the sale of her previous home and her mothers home.

    -Preventative foreclosure.

    • Six months of relief for homeowners who, due to circumstances, cannot make payments, cannot sell, and cannot refinance–yet they have equity in their home from past sales….if we do not do this….everyone is going to be on welfare… This gives homeowners six months to get their house sold. The payments can be added to the principal with no loan modification, no extra fees; IT’S EITHER THIS OR THE PROPERTY GOES TO SHORT SALE OR FORECLOSURE—THE LENDER LOSES MORE—THIS IS A WIN-WIN SITUATION FOR ALL. Homeowners provides list of income and monthly expenses to qualify—there must be a change of income to show hardship.
    1. One client’s home was foreclosed yesterday, April 29, 2008 at 9:30AM—last year they were forced to choose: either pay the mortgage or pay for their “Cobra” health insurance—it took 9 months for Social Security to approve their disability. (they both had many medical problems) and could no longer work…when they did work…they were factory workers….
    ii. Short sale/ Foreclosure
    • Upon listing property, Realtor contacts Lenders immediately and a complete list of required documents be sent to Realtor—and returned to Lender within 10 days, as mentioned earlier. A negotiator is assigned to work with Realtor.
    i. Realtor must have direct access to Negotiator w/phone, fax, e-mail instead of automated phone systems making communication impossible.
    a. Now you have a qualified buyer—Market value has now been determined—Negotiator must have the authority to sign Purchase and Sales agreement..
    b. 7 day DECISION turn-around for short sale and foreclosure decisions from when a qualified offer is presented—BY NOW ALL THE WORK HAS BEEN DONE. 30-45 days total time to close.

    6. Mortgage Originators—A little preventative medicine—they should be LICENSED AND PROPERLY trained in taking complete applications, having a full and complete knowledge of their mortgage products and have an overview of mortgage processing, underwriting and closing process.

    6. LENDERS for new construction LOANS–PROCEED WITH CAUTION when lending on new housing projects—determine value, salability and current inventory as well.

    I believe that, neither Congress, the President, or the new candidates have a clue as to how to resolve this…….and they can not relate so they do not care. I also believe that the CEO’s of all the lenders are making huge mistakes. “Get out of the office for a minute and listen to the people who are dying in the street”. Not just people who bought the 0 down, 80-20, no income verification, but people who have worked for 30-40 years and have lost all their equity….

    AND EVEN IF YOU JUST THINK ABOUT THE MONEY—AND NUMBERS, REPORTS, AND CHARTS…..THEN BE SMART ENOUGH TO HAVE A SYSTEM IN PLACE THAT WORKS–EXPEDITE THE SHORT SALES….AND FORECLOSURES…I challenge you….to work with me and others to make this happen.

    In closing, let me quote one our greatest Presidents

    Abraham Lincoln said “The wealth of a nation lies in the homes of its people.” Then, the reverse is also true….”then the weakness of a nation lies in the lack of homes for its people. We have lots of homes, and we have created such an enormous nightmare “when so many are losing their homes”. Yet, the CEO of Countrywide reported in one writing earned $57 million year. 10 million dollars in stock options, and other unknown income and benefits.

    Government and Industry, including lenders must fulfill the needs of the people in a way that it does not make us dependent on government, but independent and secure. By the way, this is also true…in many developing nations….they need food, clothing, and shelter….not weapons…..We pay $80. per hour to laborers from this country to be a laborer in Iraq, when there are millions of able bodied men who would work for $10. per hour in their home towns who would take pride in re-building their own country.

    In past elections, everyone promises that they will make a change that benefits all Americans….yet there is no change and the “status quo” remains. The upcoming elections—everyone says “they are the candidate for change and experience”. If we do the same thing over and over again…can we expect different results?

    What if the polls were open…and no one showed up to vote? What if the malls opened and no one goes shopping…for a day, for a week? What if April 15th came and no one filed their returns unless they were getting a refund.

    What if there was a silent revolution in this country…of the people for the people and by the people? Would things change then….

    We ask every Realtor to sign a petition for some relief from “our government “ to help this distressed economy….we are constantly attempting to fix other countries’ problems, when we can’t fix and wont fix our own….for sale signs, for rent signs and abandoned homes on almost every corner. It is easy for government to print more money as they need it…but what do we do?

    We ask for immediate laws for lenders to quickly negotiate with homeowners and Realtors. Relief from lenders and “our government “ to help this distressed economy…reduced interest rates, tax cuts, $300.00, without a Fair and Uniform Standard of Procedure does nothing to handle short sales and bank owned property….. does nothing to resolve the real issues.
    Just a note: It means nothing for me to get $300. from the stimulus package, because it will cost me $1100. to do my returns.

    Update on my story as of February 7, 2008

    I received a call from the negotiator yesterday….they finally received the package that I sent on January 10th. They are closing the file until I have another offer—after loosing three buyers; I still do not know what they will accept…

    Update as of April 30, 2008. We found another buyer at $206,000. minus $6,000. for buyer closing costs…..he’s been waiting 3 months and now…. has now requested his deposit back.

    The house is back on the market at $199,000. I am told by the sellers of 40 Horton St. Attleboro, MA….yesterday that both heating systems need replacement…..which will again reduce the price to I don’t know what…..the next buyer will offer. I showed the house yesterday, many of the windows were open, as I could smell fuel oil….The last prospect asked about the fire escape from the second floor—is it legal? I then faxed a note to the City of Attleboro Building Inspector, Doug Semple. He said that State Building Code requires (current window to be cut a made into a door to a 3X3’ platform and a staircase 3’ wide to another platform and then to grade.

    AS A RESULT OF MY INTERVIEW WITH THE BOSTON GLOBE ON THIS ISSUE:

    April 28, I received a call from Sasha Rainey, the administrative assistant to the Vice President of Countrywide….she asked for the phone number for 40 Horton St. (The Barbozas) The seller then called me and this is what they offered her after 8 months.

    1. A new mortgage of $311,000. plus attorney fees, late fees and interest for the last eight months. (which ads approximately an additional $20,000.)
    2. A rate of 5.5%/fixed for 30 years/paying interest only for the first 5 years
    3. The payments would be about $2200. a month

    The seller has moved out of the property. It will need 2 heating systems before next winter and a lot of interior repair and now that the fire escape issue has come to my attention…..I MUST DISCLOSE THAT A LEGAL FIRE ESCAPE MUST BE INSTALLED PRIOR TO CLOSING, OR MONEY HELD IN ESCROW… Current value of the property? We’ll see what the next offer brings.

    These people at Countrywide are insane…..they must be on drugs….they should be in jail.

    Now, I have to go and show 40 Horton St. again in 15 minutes.

    Thank you….this is everyone’s battle…..
    I have sent this letter to at least 150 people and organizations; the President, Federal Rserve, NAR, Congressmen and Senators, Fox News, CNN, radio stations, The Boston Globe, and other newspapers, etc.—
    I have also started a petition of local Realtors
    Someone has to listen—I would love to have a hearing before Congress and ask Mr. Mozillo a few questions.
    A petition to our leaders–We are the voice of 1.3 million Realtors

    Rose Spoltore 16 E. Washington St. North Attleboro, MA. 508-643-1144 BB904758
    Concetta I Golant 16 Washington St. North Attleboro, MA. 508-643-1144 BB902376
    Stacey Susi 16 East Washing