Is Foreclosure no longer an “F word”?

foreclosure.jpg

Back in the day (a year ago or so), when the bank called to tell you that you were being “foreclosed” on, it was synonymous with another word that begins with “F” and ends with “ed”. You’d call everyone you knew, sell your car, sell your eggs, and sell your plasma to get yourself out of that state.

Not so much anymore. You know it’s bad but this is HOW bad:

  • Previously here in the US, the average number of foreclosures ANNUALLY was around 304,000.
  • In August 2008, we had 304,000 new foreclosures for  that month alone.

Put another way, almost 20% or 1  out of every 5 homes for sale is a foreclosed upon home:

James J. Saccacio, chief executive officer of RealtyTrac, said “RealtyTrac
  now has more than three quarters of a million properties in its active REO
  database, a number that represents approximately 17 percent of the
  inventory of existing homes for sale
reported in June by the National
  Association of Realtors.”

That’s some pretty scary facts there. You can hardly turn on CBS or NPR without hearing yet  another homeowner’s story of “how it happened to me”. In years past, you might have hung yourself before admitting out loud to a friend, much less a global media outlet, that you were in the process of or had already lost your home.

The shame and stigma of having a foreclosure on your record is becoming like any other bad debt – a 90 day past due credit card, for example – just a temporary screw-up in your finances that you will be able to explain while sitting in the next banker’s chair, writing up your next mortgage.  A foreclosure no longer brands people as a ‘loser’ or someone who just couldn’t get their shit together.

In part this is because everyone, including me, knows at least a couple of highly intelligent and hard working friends who admit to finding themselves living in houses that are not worth the paper they were written on.

I think it’s good and bad and I’m starting to see that I’m  not alone. Yes, there shouldn’t be such tremendous shame associated with something so unfortunate and chaotic that does sometimes happen to people and has always happened when unforeseen emergencies took over the finances.  Sometimes a foreclosure is like being caught in a bad car crash – quick, unforeseen,  unavoidable.  For my friends’ sakes, I’m happy that the stigma is being removed.  But  I also worry.

I worry when I hear every foreclosure that has happened this year being chalked up to “predatory  lenders“.  Are the foreclosed upon to be regarded forever as “victims of the housing market”?  Was a gun to held to their heads by the Evil Overlords of Banking to sign up for a mortgage that was more than they could reasonably afford, I wonder?

I worry when I see companies like “YouWalkAway.com“,  a company designed for the foreclosees – to make it as easy as possible for  them to walk out on their bad debt with the least amount of hassle from the lender and the least amount of damage to their credit report. Foreclosees don’t  even have to talk to their bank anymore because this service now handles the whole process for them.

I worry when I hear of lenders paying foreclosees thousands of dollars to simply NOT  beat the crap out of the property  before they walk away. These lender arranged programs are called “Cash for Keys” and are increasingly popular.

And before you say “but you don’t understand, Kelly, you’re not in the middle of this like I am” let me give you the back story. 

I used to live in L.A. and work  for Countrywide. Maybe you’ve heard of em? World’s biggest mortgage hander-outer?Countrywide’s CEO parked a different luxury car in our parking lot every day and they were some amazing rides, believe me.  Countrywide was making house loans (and profits) hand over fist.   In a free market economy, it is the job of a bank or mortgage company to make profits and plenty of places like Countrywide knew how.  Those were the heady days of the real estate boom, alrighty, and L.A. was the fudgy center of the whole thing. Everyone and their dog was jumping into the biggest house they could buy (or bigger).  Who cares if you mowed lawns for a living, you still deserved a 5 bedroom home with a pool.   “Both my hairdresser and my neighbor say the housing market can only keep going higher so I’m getting into this while I can.” All you had to do was find a no-doc lender to lie to, and the easy money was all yours.

Meanwhile, we sat in our crappy but affordable apartment in the Valley, drooling over the free real estate mags that I grabbed from the supermarket every week. Every page was loaded with sexy million dollar and half a million dollar homes.  And every other page was stuffed with ads that screamed: “Come to Acme Mortgage! We offer 50 year, 0 down, interest-only loans!  No doc, no proof of income required! Get a $500,000 jumbo loan for  only $1200 a month! WHY are you still paying RENT?!?”

And my partner  and I could have gotten one of those loans, and lived in one of the houses that  we wanted, except that those loans seemed too good to be true. There’s a phrase you don’t ever hear in connection to the foreclosure meltdown.

Basic common sense told us that there had to be a catch and if you really sat down with a piece of paper and a calculator you could easily see that you were gonna be screwed,  pure and simple. It took about 5 minutes of thinking to see what the “catch” was. Now I’m math challenged and hate renting more than the flu, but even I could figure that much out. Our solution was to move back to the less spectacular Midwest where the less spectacular real estate was still less spectacularly priced and wait for the market to implode on itself (aka “correct itself”) until affordable properties could be found.   But, at the time, plenty of people stepped in to let us know how shameful and dumb it was to “not take advantage” of all the free money that was then flying around.

So when I see the people who did take advantage of those nonsensical ads being called ‘victims of the housing crisis’, I get a worried yet again.  These individuals were adults with jobs who one presumes could read the contracts they were signing.   Maybe they were first time buyers with little knowledge of the market, you say?  I was also a first time buyer with zero knowledge of the market and absolutely nobody to explain it to me.  I went to a place called Border’s and purchased a book called “How to Buy Your First Home” — and read it (and took notes as I read it).   It really isn’t impossible to learn this stuff.  So when I hear that the first time buyer’s lack of knowledge is the problem, you’ll permit me to feel rankled. 

These ‘foreclosure victims’ who took advantage of the seemingly “too good to be true” deals have lived in “their” home for free – because if you don’t put any money down and then you don’t pay your mortgage, that’s known as free rent. Now they are being paid to walk away from “their” home without damaging it beyond repair. And they are crying foul on the lenders and real estate industry.

I’m sorry but when exactly did banks become responsible for taking care of us? Banks and realtors offer a service and you get a calculator and do the math. You think about what would happen if you’re dumb enough or greedy enough to buy the biggest house a lender will give you, and what would happen if you then have a car accident, lose a job, or lose both your jobs AND your car. Because unfortunately, shit happens. 

Sometimes when I watch the news, I really wonder if I’m the only one saying “what the hell?” The shame and stigma have gone, yes, but I worry that with it has also gone our sense of personal responsibility.  Our sense of being independent decision-making individuals who make their own sound or unsound financial decisions, without any expectation of being ‘taken care of’ by outside entities like banks and realtors.

Maybe in the next 10 years, after a few more $100 billion dollar bailouts, my worry will just be considered outdated thinking.  Who knows?

I can tell you, though, that no matter how stringently Uncle Sam regulates mortgage lenders in the future, he’s not gonna be able to regulate the greed that comes of American wanting bigger fancier things than we can actually afford. Will we still think bailouts are a great idea then? Will we still be calling foreclosees “victims” as their greed plays into that of Wall Street and the world’s financial markets come tumblin’ down again?

Think I’m right, wrong, or crazy? Well that’s why I have a COMMENTS section right down there – and you DON’t have to register to leave a Comment so jot something in there - BRING IT ON, READERS!   I always love a good fight :)

And if you’re looking for a few good foreclosures, there are (as always) quite a few available:

LINCOLN SQUARE:

5411  N Artesian Ave Chicago, IL  60625 Price: $157,500
 

Beds: -
Baths: -
Sq. Ft.: 1,140
$/Sq. Ft.: $138
Lot Size: 1,266 Sq. Ft.
Property Type: Condominium
Year Built: 1984
County: Cook
Listing #: 2706899
Source: Bank-Listed Foreclosures
Status: Bank Owned
On Redfin: 23 days

ANDERSONVILLE:

1281 W Early Ave Chicago, IL 60660 Price: $569,900

Beds: -
Baths: -
Sq. Ft.: -
Lot Size: -
County: Cook
Listing #: 2141970
Source: Bank-Listed Foreclosures
Status: Bank Owned
On Redfin: 97 days
Unsold in 90+ days

UPTOWN:

732 W BITTERSWEET Pl #601 CHICAGO, IL 60613 Price: $80,000

Beds: 0
Baths: 1
Sq. Ft.: -
Lot Size: -
Property Type: Attached Single Family, Condo, Studio
Year Built: 1933
Floor: 6
Area: Uptown
County: Cook
MLS#: 06977632
Source: MRED
Status: Reactivated
On Redfin: 57 days

OAK PARK:

828 N Austin Blvd Oak Park, IL 60302 Price: $70,000

Beds: 1
Baths: 1
Sq. Ft.: -
Lot Size: -
Property Type: Condominium
Year Built: 1975
County: Cook
Listing #: 2248001
Source: Bank-Listed Foreclosures
Status: Bank Owned
On Redfin: 97 days
Unsold in 90+ days
  • Jen

    Great article! I too am tired of hearing about the bailouts. I feel for people losing their homes but this has gotten waaay out of hand. Greed is greed and it cuts BOTH ways. I’d like to hear the media start putting some of the blame back on the people who SIGNED those mortgages. Ignorance of the laws of real estate is no excuse.

  • Travis

    Sorry but the US government should not be regulating banks or homeowners in a free market economy. Whether its the CEO who screwed up or somebody who wanted a huge house to boost their ego, it’s all crap. They should take their knocks like everyon else. No more bailouts!

  • bojolais_brklyn

    uh.. there is still plenty of shame in being foreclosed on… you shouldn’t have bought such an expensive house or used an ARM. You should’ve had the good sense to save more and not run up credit card debt… and now the rest of us are paying for it…

  • Emily

    You are not the only one saying “what the hell?” Thank you for this post.

    My husband and I lived in San Francisco, both professionals and earning more than double the median income for the area. Like you, we pulled out a calculator and recognized that the interest-only loan was a house of cards waiting to collapse. Like you, we also moved back to Chicago because we wanted to be able to buy a place, but do so responsibly. Had we known that irresponsibility would be rewarded, our calculus would have been entirely different. We would never have left San Francisco.

    Now, having acted responsibly, I feel as though we are being punished. Our property values will fall because our irresponsible (and, yes, greedy) neighbors have f’d up the housing market, and by extension, the economy.

    I’m pissed that those most at fault will endure the least of the brunt.

  • Ron

    I agree with you 100% but I think we will still fight. You see I can extend what you are saying to the causative effect. It’s not a racist thing, since many races are involved in the foreclosure “problem”. However, the government is the problem…and the government stepped in to help minority borrowers. Representatives for black and hispanic minority groups stepped in and claimed that these groups were being unfairly discriminated against, even though the discrimination was fair based on economic situations. The government, starting with Bill Clinton, forced lenders to give credit to borrowers who they otherwise would have considered a risk. (A little caveat here is that many among the minorities are also complaining that they were given higher APR rates! BUT that is the lenders game!! It’s called negotiation and, as you state, one can read a book and take responsibility for their own actions). It isn’t the fault of any minority that the US has so many foreclosures but it is the pressure put on the government from the representatives of these groups that gave rise to the risky lending practice.