Foreclosure and brainlessness

A recent New York Times article illustrates the nonsensical nature of the foreclosure industry. After landlord Imar Hutchins missed one monthly mortgage payment on his apartment building, the bank immediately filed for foreclosure. Mr. Hutchins lender, then Washington Mutual, refused his payment thirty days later and refused the next series of payments he attempted to make. While Mr. Hutchins was sending checks in the amount of $3500, $7,500 and, finally, $25,000, the lender was proceeding towards a foreclosure judgment.

When Hutchins learned of the action, he was able to set aside the default and is now attempting to settle the case with his lender. But the bank departments not knowing what the other was doing- one negotiating with a very willing borrower and the other steamrolling towards foreclosure- illustrate a common problem many borrowers are currently facing. Borrowers who are attempting to negotiate loan modification need to be aware that their lenders may still file a foreclosure action, even if the loan modification appears to be going well. This may, sadly, be due to the fact that the lender’s litigation department may not know what the loan modification department is doing (if only we’d all communicate just a little more). Or, it may, as some suspect and just as sadly, be because the lender is misleading the borrower- stringing him/her along with promises of modification which are not being made in good faith.

Either way, it is borrower beware. If you are behind on your mortgage, a foreclosure action may be filed against you at any time. It does not matter if the loss mitigation/loan modification officer tells you otherwise.

GET BETTER NOT BITTER: LESSONS LEARNED FROM THE AMISH

In a recent MSNBC article, several members of the Amish community in Elkhart, Indiana were interviewed about the effect of the current recession on their income earning ability. The Amish traditionally shunned employment outside their communities, earning a living through farming and producing and manufacturing home made items. Over the past decade, many began working in factories as their traditional means of earning income no longer sufficed. The current economic struggle forced many, including these adaptive Amish, out of their jobs. Once again, the resilient folks moved on and found a different way to earn a living. Rather than turn bitter, many Amish reported that their lives had changed for the better. Several reported that the decrease in income made them realize just how reliant they had become on the next paycheck and less reliant on doing things or making things for themselves. And the loss of jobs allowed many to spend more time with their families as factory work was replaced with home based businesses.

While the Amish approach to life does not work for many, the “get better not bitter” philosophy is, perhaps, something most of us can use. Those who are struggling to pay their mortgages, and hoping to get their loans reinstated before foreclosure proceedings begin need to change their way of spending and living. Those who are in foreclosure need to look at their options and, in some cases, choose the one that may not seem the most appealing, such as negotiating a deed in lieu of foreclosure with the lender. It is easy to become bitter with these choices, especially since most people making these choices have been forced into them by hard times and unexpected events.
Allowing yourself to become angry and bitter may lead to rash decision- making. For example, some may give up and walk away from a foreclosure action without thinking about the deficiency judgment that may result and others may rush to file bankruptcy. Both of these decisions have serious long term consequences and should not be made without careful consideration of all the options. Instead of becoming bitter, focus on making your situation better, even if those better days are in the long term future.

FEARING RATHER THAN FACING FORECLOSURE

I learned a great deal about fear from my first rock climbing instructor. When you are hundreds, if not thousands, of feet off the ground, secured by a thin rope and need to convince your mind that nothing will happen to you, the experience alone can teach a great deal about fear, especially when you’re afraid of heights, as I am. But the instructor taught me that there are two types of fear: the one that freezes you (hanging on a rock wall and refusing to go any farther) and the one that makes you more cautious and makes you evaluate your decisions more carefully (double checking your belay loops and, sometimes, your belayer.)

Fear is often associated with foreclosure, and for good reason. The loss of one’s home, legal proceedings against a bank or lender, a.k.a, the big guy with all the power, is enough to freeze anyone in his/her tracks. And many people do. Most people do not fight foreclosure. They simply give up, do not answer the summons and let the bank get its judgment.

This action is equivalent to freezing on the rock wall mid-climb. The situation feels so scary that inaction seems to be the safest thing to do. But, much like in rock climbing, inaction during a foreclosure fails to protect you.

Although it seems so cut and dry (you owe money, the bank can take your house), foreclosures rarely are. The bank has a case to prove and it may not be able to do so. This does not mean that you can stay in your house forever without paying, but it does give you some options for negotiating with the bank. Much like the rock climber who needs to check safety equipment, you, too, should examine your options before deciding that there is nothing you can do.

There is another reason not to go the “do nothing” route. While you may be prepared to walk away from your house, the foreclosure may not end for you at the time of sale. If your house sells for less than what you owe (and, in a foreclosure, this is bound to happen). the lender has the right to obtain a deficiency judgment. The lender also has up to 10 years to collect on that judgment, depending on what steps the lender takes. While a judgment may not be a concern in your present circumstances, it might be a big deal later on when the bank begins collection proceedings. You might be able to avoid this in a successful foreclosure settlement by getting the bank to waive its right to collect a deficiency judgment.

Foreclosure is scary and it may make you feel that you have no options. But, in many cases, you do. Before you walk away from your biggest investment, you need to know what those options are. At the very least, you may need to protect yourself from having your wages garnished or a lien placed on future property. After all, if you are walking away from your home or other property, you need to make sure the door is completely shut when you leave.

LOAN MODIFICATION AND HAGGLING: IS THAT THE BEST YOU CAN DO?

Haggling is such an intrinsic part of many cultures. Visitors to a Chinese marketplace or an outdoor bazaar in Morocco wouldn’t think twice about engaging in some back and forth about the price of an item. Its expected even. The practice isn’t as mainstream in the United States. Or is it. After reading an article about the increase in price haggling in the United States during the current recession (a bitter relief to finally use that word), where haggling was used to negotiate the price for goods such as electronics and furniture as well as services such as doctor visits and dry cleaning, perhaps our Western civilization is finally grasping the concept. And perhaps we should take the concept and apply it to loan modification.

Many people are struggling to convince their lender to modify their current loan, to negotiate a lower interest rate with their credit card company. The following haggling tips may be useful in a successful modification.

Be patient and be nice- You are dealing with an overworked loan officer whose phone is ringing constantly and who is receiving more letters than Santa Claus. Following up patiently yet persistently will help the situation, while demands will likely send your hardship letter to the bottom of the pile.

Set your standards- If you want to keep your house, you still have to pay your lender. If you want to lower your payment by reducing the amount of interest, your lender will probably want to extend the length of your mortgage. Be prepared to accept some sacrifices to achieve your overall goal of keeping your home.

Ask for freebies- When haggling for an item, you may offer to pay more and ask for another item to be thrown in for free. You’re not going to do that with your mortgage. But there are other ways to sweeten the deal. For example, prior to your asking for loan modification, you didn’t pay your mortgage at all or didn’t pay on time. Your non payment resulted in late fees being added to your mortgage and your late payment was reported to the credit bureau. Both of those items may be removed as part of your mortgage modification.

Accept the offer when the price is right- Your lender is not going to make life easy for you. If your lender believes that you are able to pay your mortgage with some sacrifice, your lender will want you to do so. Be prepared to cut items out of your budget in order to make a monthly payment. Make sure your payment reflects that.

South Florida county's web page helps residents fight foreclosure

The town of Davie recenly launched its foreclosure prevention website. The site contains a printable resource guide to with information on ways to avoid foreclosure. Also available is a glossary of terms which may not be familiar to homeowners.

The town hopes to assist many of its residents who currently face foreclosure proceedings. There are currently over 400 homes in preforeclosure in Davie. The city commission has applied to the Florida Department of Community Affairs for $2.3 million in federal Neighborhood Stabilization Program funds to address the growing foreclosure problem.