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US Homeowners Flock to Florida Event in Desperate Bid to Save Properties
In the pre-dawn darkness of a steamy night of sub-tropical rain, a queue of anxious, soggy people snakes around the palm trees outside a cavernous Florida convention centre. Some have erected camp beds or makeshift tents. All clutch sheaves of mortgage documents.
A mortgage adviser from Neighbourhood Assistance Corporation of America helps a homeowner at the five-day, 24-hour Palm Beach event. (Photograph: Robert Sullivan/Polaris/Guardian) Welcome
to America's biggest jamboree of delinquent borrowers. For five days,
the Neighbourhood Assistance Corporation of America (Naca), a
not-for-profit organisation, is working round the clock to help
homeowners hang on to their houses. More than 12,000 people have signed
up in advance and more than 20,000 are expected to turn up, travelling
from as far afield as California, Georgia and Maryland.
"It's either feed your kids or pay your mortgage," says Omayra Delgado, a 33-year-old special education teacher whose Miami house has slumped in value from $160,000 (£103,000) to $60,000. "My home is in foreclosure. I'm trying to keep it."
Politicians' talk of an economic recovery is laughable to many of those here. This is a last, desperate bid to cling on to home ownership – the event is shrewdly named "save the dream".
Inside, hundreds of loan advisers sit behind trestle tables. They are colour-coded: Bank of America workers wear red, Citigroup are in blue and Wells Fargo are in black. Even the moribund government-supported refinancing giants Fannie Mae and Freddie Mac are here, but their budgets don't run to natty coloured clothing.
Borrowers go through orientation and financial counselling sessions. Then, for the luckier applicants who can show a steady income, the loan advisers have the power to reduce interest rates or even write off a proportion of loans.
Bruce Marks, Naca's chief executive, says this is the only way to dig the nation out of the housing morass: "What you hear from the Obama administration is 'we're helpless, our programmes aren't working'. What you hear from Congress is 'we don't know what to do so we're going to do nothing'."
Every little adjustment is crucial, because for all the White House's hopes of a swift bounce back from recession, the US property market is showing signs of renewed distress. Some 10% of US households with mortgages are behind on their payments, according to figures last week from the Mortgage Bankers Association. The percentage of people beginning to have trouble with their loans has begun to rise again, after falling earlier this year – loans that are one month in arrears have gone up from 3.31% to 3.51%. And home sales in July were down 12.4% on June, dropping to 276,000 – the lowest since records began in 1963.
Repossessions
Radar Logic, a property data firm, says the usual summer uptick in property prices has barely happened this year. Thousands of repossessed homes have been put on sale by banks at knockdown prices, inhibiting any vitality in the market. "The inventory of distressed property for sale in this country is just staggering," says Radar Logic's chief executive, Michael Feder, who predicts an imminent "double dip" in housing. "There's just no momentum in pricing, no momentum in inventory."
The US treasury's efforts to help borrowers aren't bearing fruit. The government's "making home affordable" programme was supposed to protect 3 million homeowners from foreclosure. But the treasury admitted this month that only 422,000 loans have been permanently adjusted so far. The rate is slipping by the month and 616,000 trial modifications have ended in failure.
This outlook is alarming. In the same way the mortgage crisis pushed America into the worst financial storm since the 1930s, a fresh collapse in housing could scupper a fragile recovery that is barely taking root in the world's largest economy. Goldman Sachs puts the chance of a double-dip recession in the US at 25%. Mark Zandi, the chief executive of rating agency Moody's, has raised his view of the likelihood from 20% to 33.3%. Nouriel Roubini, the economic guru dubbed "Doctor Doom" for his early prediction of the credit crunch, reckons the probability is more than 40%.
Experts at Capital Economics predict that by the end of the crisis, as many as 4 million Americans may lose their homes: "Aside from the considerable social costs, this does not bode well for consumer spending, bank profits or the housing market itself."
Florida is an ideal spot for the latest in Naca's mortgage-altering marathons, which have also taken place in Washington, Atlanta, Phoenix and Las Vegas. The Sunshine State, beloved of British holidaymakers, is in property hell. About 45% of homes here are in negative equity, according to CoreLogic, a research firm, which calculates that Florida's stock of property is worth $859bn but has $771bn of mortgage debt outstanding.
Irresponsible borrowers are partly at fault. As Tea Party activists never tire of pointing out, property purchasers should not have taken on mortgages they were not able to afford. A CNBC presenter, Rick Santelli, articulated this view with an on-air rant that went viral on the internet last year, calling for a referendum "to see if we really want to subsidise the losers' mortgages", claiming government aid for strugglers "will make Thomas Jefferson and Benjamin Franklin roll over in their graves".
But irrespective of blame, many of those who have travelled to Palm Beach are simply desperate. Darnette Anderson, a receptionist whose husband, Kenneth, spent the night queuing, says her house, which she bought for $115,000 in 2004, was recently valued at $42,000. With her husband out of work, she cannot afford mortgage payments of $1,400 a month: "I just hope and pray that we can get this settled and move on to a comfortable repayment schedule."
Yrena Cruz, a Wal-Mart worker from Miami, says she and her boyfriend were sucked into an unrealistic mortgage by a low "teaser" rate which subsequently changed to an impossible amount – and the housing crash made it unfeasible to refinance. She said: "I'm worried sick. I can't wait to get this finished with. My house was worth $400,000. Now, it's probably half that."
Some come from surprising backgrounds. A Californian dentist, Dennis Jacobs, 65, flew 2,600 miles from San Diego to try to renegotiate a mortgage on his apartment. He sold his dentistry practice to pay off debts and is now working part-time. He is pessimistic: "I don't see any uptick in the economy at all. I think the unemployment figures are understated – there are large numbers of people underemployed."
The jobless rate in the US is 9.6% and has stayed stubbornly close to double figures in spite of Barack Obama's $787bn economic stimulus package. One reason, say economists, is that older people in states such as Florida are delaying their retirement to cope with straitened finances.
Naca's chief executive worries the US property crisis may have swung to the opposite extreme, with risk-averse banks reluctant to write even the most sensible of mortgages. Marks says banks "just refuse to lend" because they see no prospect of the "abusive" profits they once made. He is pessimistic about a short-term return to stability: "If somebody is used to getting intoxicated, to taking an extreme amount of drugs or alcohol, then they're never going to be satisfied with just a beer."
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Show All"Yrena Cruz, a Wal-Mart worker from Miami, says she and her boyfriend were sucked into an unrealistic mortgage by a low "teaser" rate which subsequently changed to an impossible amount – and the housing crash made it unfeasible to refinance. She said: "I'm worried sick. I can't wait to get this finished with. My house was worth $400,000. Now, it's probably half that.""
Would someone please explain this to me? I mean, I'm not one of those to cast aspersions on anyone easily, but WTF. I mean, how much could this lady be making per year at Wal-Mart that makes it possible to have a $400,000 home? I don't know what her boyfriend does for a living, but there is something really strange here. I really don't get it.
I transcribed a divorce hearing sometime last year in which there was this same situation. The wife had her own business she dabbled in and claimed that she was making $12,000 a year, her new husband (and the second she was divorcing) was a corrections officer making something like $45,000 (and possibly less, don't have the exact figure in my head now). She had a home built in a very tony section of NJ -- $450,000 home -- using money that she had apparently gotten in a divorce settlement.
They bought a lot of nice furniture -- Laura Ashley and stuff, credit card debt up the wazoo. Second mortgage taken out to pay that debt off, and by the time of this divorce the credit card debt was up the wazoo again.
I was sitting there typing this, aware of the fact that we haven't used credit in over 10 years (we're on the pay-as-you-go method) we make more combined than what this couple makes, but not a lot more. A $400,000 to $450,000 home -- are you kidding me? This couple also had new cars over their time together, and she had a couple of kids from her first marriage.
All I know is that the simple math was blowing my mind -- and the judge seemed a little speechless, too, when the numbers came out. And, to put the icing on the cake, this was a bitter court battle and private lawyers were representing these two.
Another long winded appeal to personal responsibilty. Her house is worth less the 200K I gather, but she went out and "went crazy with credit." ? Does she belong on the street? Defaulting is a cherished tradition for Wall Street banks, they do it almost as relentlessly as they mine wealth from a devastated middle class, then turn around and scold their powerless victims for not honoring contracts. In the old days, it would have been a seedy neighborhood, a ham fisted cigar smoking thug who would offer you a loan to make it through your tough times (medical bills, food, shelter) with the intent to bust your kneecaps and terms that would keep you under his foot for as long as possible. Now it's as easy as getting a Capital One credit card to maintain the illusion of life in the middle class, with the same unsavory results for getting in debt.
This is not my appeal to personal responsibility, nor do I believe anybody belongs on the street. I don't really know what the answer is here, except that houses are too expensive, and at some point the middle class was able to afford a modest home on one blue-collar job. If there was a second job it could be used as savings for unforeseen events in the future, so I family did not end up on the street. Where I live, of course, even if you paid cash for the home and didn't have a mortgage, the property taxes could do you in very easily.
Part of "The Con" is that the money lenders knew that these people could not pay their mortgages......The Money Lenders needed the big loans so that "They" could bundle them and sell them to investors as "Great Investments" and that, to me, was "FRAUD"!. But, no one talks about "Fraud" because it was Goldman Sachs, Chase, CitiCorp and Bank of America all in the game!
The sale to unuspecting and not very literate people, when it comes to money matters, was easy, "Look your income is just $45,000 but in 5 years your income will probably be closer to $80,000.....At that time you can either refinance at a lower rate or keep this rate which will only increase at maybe .25% a year."
Yes, people are stupid and stupid people are easy to take advantage of!
The next round of foreclosures will come when the taxman hasn't been paid for over 4 years.....Who gets the property first, the bank or the tax man?
You are absolutely right about the Con.
Not only were people told that they would be making more money - they were also told that the house would be worth alot more when it was ready to refinance.
This is called a Bubble.
In 2003 I Googled "Real Estate Bubble" and hundreds of boring tomes by economists came up - all predicting a crash of the "Real Estate Bubble". And now the politicians, banks and regulators are pretending they didn't know!
The "stated income loan" was created so that bankers could steal and encourage people to use their homes as ATMs. Thus, the economy could be artificially propped up so GW Bush could run his illegal racket called the Iraq War without any financial consequences.
It was not, "to allow more people to own their own homes" - that was, and still is, the biggest lie of all.
I feel bad for these people but their understanding of what is really happening to them could be revolutionary.
Ellen Brown
Author, "Web of Debt"
Posted: August 19, 2010 12:54 PM
Homeowners' Rebellion: Could 62 Million Homes Be Foreclosure-Proof?
http://www.huffingtonpost.com/ellen-brown/homeowners-rebellion-coul_b_686921.html
Not only were people conned due to their ignorance or language difficulties, but when I bought my house in 2004, the loan I requested (standard fixed %, 30 years) was sent to me for review and thank god I reviewed it! They had changed the fixed to an ARM! I called and told them to fu%% off. They were crooks, pure and simple and apparently had had much success using this tactic.
A few years ago you couldn't flip through more than four cable channels without landing on a "flip this house" type program.
The teaser rates and liars loans allowed relatively poor people to place a large bet on the housing market and for plenty of people it paid off. Even if you didn't flip the house, by the time your payments jumped you were in a position to tap your equity which was growing fast as a consequence of the ridiculous bubble.
While plenty of critics were making solid arguments about how it couldn't last, the overwhelming majority of press accounts provided empty validation for those who really needed to hear that "you can't lose money in real estate." If the the Chairman of the Fed thinks it will never stop, why should we expect a dentist to be any smarter?
For the banks it made even more sense. Bankers could count on the rising prices to sustain their profits and justify their bonus. Even if they knew it would all blow up, they had no reason to care. They would milk it while it lasts and move on to some other job or retirement if by chance they were ever to be held accountable for their recklessness.
There was nothing stupid about it. It was a gamble that paid off for a long time and then it didn't. The last ones out lost money.
Yeah - I noticed that too (while house-sitting for a neighbor with TV), and I'd been buying, selling, and renting for decades - it isn't that easy and you really have to do your homework. This was the real start of the 'real estate balloon' - another 'get rich quick' scheme aimed at the desperate. It's called a 'Ponzi scheme' - and it is fraud. And the bankers always grab the money and run - the few gambles that paid off for individuals was just pocket-change. People who lost out need to organize against our corrupt government - that's the first step.
"Irresponsible borrowers are partly at fault. As Tea Party activists never tire of pointing out, property purchasers should not have taken on mortgages they were not able to afford."
Yes, borrowers are partly to blame. On the other hand, the Federal Reserve had the authority under HOEPA to regulate all mortgage lenders. Lier loans were rampant and apparently seen as money-makers by the Feds. When bankster managers can get rich by ignoring regulations and engage in fraudulent activities with the possibility of paying a small fine, why would the greedy parisites do anything else?
After all.....isn't Goldman Sachs', Lloyd Blankfien, doing God's work?
The problem is when basic necessities like housing become commodities, SOMEONE is going to manipulate the system for their own profit.
The fact homes have slumped as much as tthey have (160k to 60h in Miami) is a clear illustration of the fallacies of the "Marketplace" and "Capitalism".
What is the TRUE intrinsic value of a home?
What is its value based on "speculation" and conditions not related to true VALUE?
Again we speak of shelter which is one of the things required to live a somehwat decent life. The price of such should not depend on the whims of the market.
I still remember that gentleman from the 1980's and his advertisements for "distressed property sales" as in "How to grow rich off other peoples misery".
This is happening today. People are growing rich off that misery. The Real estate bubble helped to facilatate that.
This process is NOT new. It has been used before to squeeze the masses so their wealth is forced upwards.
What is even more distressing is the news of the Chinese buying parties. I read a few articles about this last year. To me that is kind of frightening. These are not U.S. citizens, but they are buying foreclosed housing in neighborhoods and renting out said houses, and when they were ready to move here they would simply kick the renters out. So are people being displaced by opportunists and the new upper middle class Chinese that our corporations created?
Here's one of those articles:
http://www.usatoday.com/money/economy/housing/2009-02-10-china-foreclosed-us-houses_N.htm
It's frustrating that Marks never seems to remind people that they've been had. They've been ripped off, this should be a crime, but NACA seems to offer only HAMP, which has been written about extensively as a total failure and Treasury admitted was a give away to banks!
The majority of the blame for the housing bubble rests on Wall Street,
where they appear to have gotten away with a massive shell game. The poor borrowers had no idea what they were stepping into, their assumption may have been that since they've been vetted by a "prestigious" financial instituion, they must have considered the ability to pay the loan back. The exact opposite was frequently the case, with active betting *against* the ability to repay! This is known as loan sharking, and it is an ancient graft. This time in the US we had regulators(!) and Treasury officials, and Federal Reserve Chairmen looking the other way or actively aiding and abetting this criminal effort to make millions debt peons. It is incredible that we haven't seen much violence as a result of what's happened. Wall Street investment firms and securitization drove a knife into housing into this country, and the worst whores of all were the ratings agencies.
It is disgusting, Banks are swimming in profits and serfs are lining up to avoid ending up on the street.
"It's frustrating that Marks never seems to remind people that they've been had. "
Talk about being had. That lady with the $115k house paying 1400/month. Quick calculation tells me that's about 12% interest rate. That's a lot even for 2004.
A drug dealer gives someone the first few hits for free and once they get that person hooked they start demanding cash for the hit. Now the person will do anything to get their fix.
A bank loan officer offers a rediculously low APR on a home loan to entice lower income buyers. Once the ink is dry on the contract they shoot the APR throgh the roof. Now the person will do anything to keep their house.
One is called a felon and the other is called a banker.
Moral of the story?
The only difference between a drug dealer and a bank is a business license.
then, when you consider that much of the bank's money is from the sale of the drug, you come full circle...
Yes, on the face of it it seems odd that a person on low pay can afford a $400,000 house. But the banks lending the money must've asked what these people earned. And doubtless the banks would encourage them to take out loans on the basis of ever escalating house prices making them richer on paper, and so allowing them to cash in on their houses at sometime in the future.
Which is exactly the same process that the banks used for every other transaction they made themselves. However, the banks were given gazillions of tax payers money to bail them out, so why couldn't the general public be given gazillions of taxpayers money to keep them in their houses; It would be their money after all, for remember, they are the taxpayers?
No, the truth is that the people trusted the lenders, the lenders reneged on the people, and now the lenders want not only of the people's money, but the people's houses to.
The voters of America are becoming enserfed, it's the denizens of Wall Street and Capitol Hill who own America now, and the little people are merely the payers. The rich in America are becoming disgustingly rich while the poor are becoming impoverished. This I'm afraid is the history of all empires, they they begin poor, vital and enthusiastic and end up decadent and bankrupt.
I watched a doc. by Danny Schecter (on Link-TV, please pledge for their survival), where he lays out what led up to the housing crash, and more than 15-20 times I heard the expression "the American dream." What is the A.D? Is it about an accumulation of wealth or owning a Mcmansion? How do we value ourselves? Is our only value based on what we do for a living, how much money we make, what kind of car we drive or how many sq. ft. of home we own? Yes, there is no doubt, Wall Street mortgages were set up for the rich to win and those searching for that A D to get screwed. That's been the modus operandi of high finance capital since it's inception. Welcome to the land of caveat emptor. This time around, they appealed to people who, heretofore, had been left out - namely people of color. Now, here we are with the most vulnerable losing everything they thought was their shot at admittance to that A D club. Did they make mistakes? Yes. Were they naive? Yes. It's too bad that Economic classes, which I thought were mandatory in high school, didn't teach the nuts and bolts of capitalism, with an emphasis on NOT signing contracts that you might not understand. All of us probably have a sad story of signing a contract that came back to bite us in the butt. It's horrible when it's your home, and it has become painfully clear that housing values don't always go up. What SHOULD be done by these banks supposedly trying to assist people, is for them to assist people in finding homes they CAN afford. Show folks the listings, and, hopefully, there's a home they can afford with above board conditions.
These massive foreclosures challenge us to ask ourselves some deep questions about our value as human beings.
I'll end this with a quote from one of my favorite comedians (after Bill Hicks), "They call it the American Dream because you have to be asleep to believe it."
To Leslie Otter:
George Carlin, but I believe that is a paraphrase...
Then there was what's-his-name in the old TV Western series, Maverick: "If you can't trust your banker, who can you trust?"
*****
Mortgage transactions represent a near-perfect example of why strict regulations are needed in some situations.
I recall around 15 years ago when we went through the process of buying a modest house in a community well-known to us. No government bureaucracy was involved (except to formalize the sale) and it was a cash transaction (no mortgage, straight-forward Quit Claim Deed).
Even then, the paperwork was half an inch thick.
We knew the Realtor. We knew the lawyer. We even had a friend familiar with housing construction take a look at the house before purchase.
The more formal inspection (through the Realtor) claimed that the roof didn't leak and the house was termite free, among other things. The roof leaked (just a little at first...) and there were termites.
A couple of years later I visited the courthouse and traced out the property from the plat books. and realized that almost a fifth of the property was actually controlled by easements:
The railroad easement was 30 feet from the center of the tracks; adjacent to that easement and closer into the yard, another 15 feet for the town's storm sewer easement; then also "our" half of the adjacent alley was a town easement. I went back and checked that half-inch stack of documents. No mention whatever of the easements.
We had been ripped off by people we (thought we) knew!
Many critics blame victims for not reading the documents they sign. Despite my experience with municipal law, there were all sorts of paragraphs in our documentation I did not understand or that might have contained unstated implications.
I report the above by way of comparing our situation with that of MOST of the victims of the fraudulent "housing bubble." For starters, as a mortgage was involved, their paperwork would probably have been at least twice ours---page after page of legalese. Next, the buyer was probably doing a business deal with total strangers. Third, they were probably told that the value of their new property would rise magically (as in fact it would have during the bubble). They were assured that the company would work with them, and that they should relieve themselves of any anxiety they might feel over the enormity of the transaction---all the paperwork is in order, and everybody else is doing it.
Put another way, faced with slick snake-oil salesmen with years of experience in such transactions, in the unregulated market that WAS the housing bubble (along with all the secondary and tertiary mortgage paper bundling), even if the average citizen had read all the fine print, he or she would still be incompetent to complete the transaction. (I wonder if that could be an affirmative defense...!) I'd also bet that most of those homebuyers who were victimized by this massive and systematic fraud did not have their own lawyers, etc.
The taxpayer bailout of the financial institutions involved in this criminal conspiracy is a double whammy for the victims of the bubble. Not only have many of them lost nearly everything they thought they owned, but their taxes are going to the same people who ripped them off.
Funny, isn't it, how our government could figure out a way to bail out the big financial institutions, which continued to pay huge bonuses and quickly showed huge profits, but "our" government just cannot seem to find a way to make the victims even close to whole. Is that incompetence, or something else.
You be the judge.
-30-
Gee, when most of my generation bought their first houses, they either got a GI loan or bought on contract-for-deed. All of a sudden, banks starting pushing out the contract buyers (I used hold paper too - it was a good deal for both sides) and housing prices suddenly shot up as well. When we bought our second home, there was a bank involved (mortgage with the party from whom we were buying) so naturally, I hired a lawyer. Good thing too - the bank tried to screw us over (surprise, surprise). If you can't afford a lawyer - you can't afford a house either.
I'd like to see houses down to what they are actually worth on the market. Considering real wages have been stagnant since 1970, it wouldn't be hard to figure out 'true value' for such. Houses in my area that sold for $20-50,000 had recently been selling for over $150-225,000 - while real wages in the area declined. What's wrong with this picture?
Also, there should have been a revolt against zoning laws that required a gazillion square feet (to raise more real estate taxes) and several bathrooms in every house - that's plain nuts. In the '50s, a 3-bedroom 2-bath home of 750sq ft was considered adequate for any middle-class family - you wouldn't be allowed to build one that small these days.
The only way this will settle down is for mortgages to be written down (why did they pass those bankruptcy laws? tort reform? ever wonder?) to true market value (mark to market) and even then it will be a hard slog since unemployment and underemployment have brought wages way down - that must be reflected in both housing and rental prices. Banks are refusing to take such losses - and government gangsters sure aren't going to force it down their throats. Somebody has to take a haircut, and only the wealthy can afford it.
Too bad all these people rushing to mortgage clinics won't invest in protesting in the streets of their own capitol, or going to DC - where the real problem exists.