Email from a reader, on not being foreclosed on.

Under the fold there’s a moving email from a reader, in response to my post on homeownership when the bank won’t foreclose. There’s a lot of this out there, and there’s going to be more by the end of 2010. Here’s the money quote, though I encourage you to read the whole story:

The bank did not foreclose. They have still not foreclosed, despite one full year of non-payment. What the bank has done is threefold: They continue to report us to credit agencies for non-payment. They have called me daily, sometimes six to eight times per day, from multiple numbers, to request payment. (I’ve had four calls today, including two while writing this.) Finally, they have changed the locks on the house. Our real estate agent attempted to continue representing us, to show the house, to check on it for us. About mid-summer, he called to report that he could no longer access the property…We have received no paperwork to this effect….

They continue to report us as delinquent on payments. This is actually more harmful to us than a foreclosure would be. A foreclosure would be a massive credit hit, but one which would begin to repair itself immediately. We could work to fix our credit history. Repeated delinquency notices are a different story. We had credit cards canceled without warning. Others reduced our limits. We cannot replace our car, we cannot look for different housing, we cannot do anything which would require a credit check, because on paper we look like bad people. We are thankful that we have for years trusted our money to a credit union rather than to a bank. They have treated us well, judging us by our history with them rather than by our credit score.

What’s a night watchman to do in this situation? This isn’t tricky – unless you are an anarchist, you must believe that it’s the government’s job to go after these kinds of property right disputes. This is one reason why the taxpayer subsidized payday lending of the HAMP program (and that’s totally unfair as payday lenders have way better numbers than HAMP) is so frustrating. We have great infrastructure to go after this. We can come up with modifications to bankruptcy to get this look less nightmarish. And when we don’t do this, it makes the housing market far more of a clogged-disaster than it currently is. Trying to ‘nudge’ servicers (have you met servicers?) is exactly where the government is going to make clumsy, easily-gamed, mistakes.

Full email:

We purchased our house as a primary residence after I accepted what looked like a great job after finishing graduate school. This was in 2006, just before the bubble burst, when everyone in the industry was pretending there was no problem and that buying a home was the best investment one could possibly make. This was a first-time purchase for us. We had excellent credit, a history of paying off loans early, and (aside from college loans) no outstanding debt. We’re both college educated. My wife has a BA, I have a PhD. We did our research. We asked the right questions, and we thought we were doing the right thing. We second-guessed ourselves repeatedly. All economic reports said to buy now, that we couldn’t go wrong, so we took the plunge.

We tried to make it work out. We were proud of our first home. It was (and still is) a nice house, in a nice neighborhood. We didn’t buy it to flip it. We bought it to live in. We made some large improvements to the house, remodeling both bathrooms and the kitchen, removing carpet and restoring the wood floors, even down to small details like repainting, replacing all of the electrical sockets, switches, and improving the lawn. Despite all this, as it turned out, the job wasn’t what I expected. There was little opportunity for my wife. We weren’t happy, and when a much better offer came in, we jumped at it. We had to. Staying in that job would have broken us. It almost did. We put the house up for sale, and moved halfway across the country – quite literally. We had a very good, very understanding agent working with us on the sale. We also had the economy and the collapsed market working against us. We tried to be proactive. We contacted the mortgage lender, repeatedly, and asked what we could do to ensure that we would not fall behind before the house sold. We were told quite frankly that so long as we were not behind on payments, they could offer us no help.

Our only real choice financially was to rent the house (for much less than our monthly mortgage) or walk away. We tried to make it work for two years. We had renters, which we were nervous about. Living as far away as we did, we had no way of knowing whether they were caring for the property. If we hadn’t had a good relationship with our real estate agent I don’t think we could have done it for as long as we did. During this time, we contacted the bank again, repeatedly, flatly telling them that we could continue making payments so long as we had renters, but not otherwise. They again offered no help. What’s more, we were told that, as landlords, the help they could offer us (were we behind) would not be available, because we were no longer living in the house, making it an “investment property” rather than a home – as if we had made this choice willingly.

After much worrying, stress, and tension, we made a decision. We needed to continue with our lives. We couldn’t let this house stop us from being happy. We decided to start a family. It was planned, but it wasn’t an easy decision; even though we were both getting older, we could possibly have waited, but we couldn’t see any sense in putting off our own lives because of a bad run of luck. We could not face a future in which we ended up childless because we waited too long in the hope we could sell a house. It wasn’t worth it. We again called the bank. We told them that we would be paying child care soon – as much per month as our mortgage – and when that happened, we could no longer continue with payments, even with renters. We asked them what we could do to protect our credit. They offered no help, because we were current on payments.

In January of last year, our renters moved out with essentially no warning, because the primary wage earner in the family we rented to had lost his own job. That was the last straw for us. We accepted that we would be faced with bad credit, but we knew we could no longer continue making payments. We needed to save for our son, who was due in the spring. We needed an end to the stress. Most of all, we knew from our own research that the state in which we owned property had a non-recourse law in effect, stating that in the event of foreclosure the bank would receive the property but could not burden us with additional financial difficulties. We could accept the credit hit if it meant that we could move forward with our lives. We contacted the lender and informed them that, as we had informed them multiple times before, we would not continue to make payments. We were told that a foreclosure would be the likely result of our actions.

This decision is within our rights. We did not take any action that we were not allowed, by law or contract, to pursue. We expected that our stressful experience would be over soon, and we could begin rebuilding our credit. We were wrong.

The bank did not foreclose. They have still not foreclosed, despite one full year of non-payment. What the bank has done is threefold: They continue to report us to credit agencies for non-payment. They have called me daily, sometimes six to eight times per day, from multiple numbers, to request payment. (I’ve had four calls today, including two while writing this.) Finally, they have changed the locks on the house. Our real estate agent attempted to continue representing us, to show the house, to check on it for us. About mid-summer, he called to report that he could no longer access the property. Despite the sign in the yard and the lockbox on the door, the bank agent did not contact the agency for access to the property. They simply broke off the real estate agency lock and changed all of the door locks. Our agent informed us that he didn’t think the bank could legally do this unless they had taken possession of the property. We have received no paperwork to this effect.

As for the phone calls, at first I answered them, explained our situation, and asked what could be done. Unlike our prior conversations, the minute we were behind on payments the bank was suddenly helpful; however, the help offered was either not available to us as we did not live in the house, or was help with a short sale, which was impossible as a sale requires a buyer, and in over two years we had exactly zero offers. It quite quickly became clear to me that any and all requests to put a note or explanation in our file were either ignored or were not referenced. I requested that all future contact be made via post. This did not happen, so I stopped answering the phone. They continue to call, and I continue to add new numbers to my list of those I will not answer.

They continue to report us as delinquent on payments. This is actually more harmful to us than a foreclosure would be. A foreclosure would be a massive credit hit, but one which would begin to repair itself immediately. We could work to fix our credit history. Repeated delinquency notices are a different story. We had credit cards canceled without warning. Others reduced our limits. We cannot replace our car, we cannot look for different housing, we cannot do anything which would require a credit check, because on paper we look like bad people. We are thankful that we have for years trusted our money to a credit union rather than to a bank. They have treated us well, judging us by our history with them rather than by our credit score.

The fact is that we are actually doing well, housing situation aside. Once the decision was made, we were able to move on emotionally. Our baby is healthy. We can afford our rent, and our day care. We love our jobs, and we have been lucky enough to find landlords who not only understand our situation but would be willing to work with us if we wished to purchase the house we are now renting, under a land contract. We have been extremely lucky. Many other people have not. We have friends who are in similar situations, some who have been making payments on multiple properties for years, with no end in sight. There is no help for us, or for them, from the banks. None of us made bad decisions on housing. All of us have been caught by the bad decisions made by the banks. The market did not collapse because we bought houses, yet we cannot sell them because the market has collapsed. They were bailed out. We were not. They were offered help, yet offer none to those who borrowed from them until it is too late to do anything. Those people who accepted loans they could not afford, and those who offered them, have dragged many otherwise responsible people down with them when the bubble burst.

As far as I know, there is no way for us to force them to foreclose. We simply have to wait. The bank knows that we could not sell the house. We tried, right up until they stopped us from doing so by refusing access. The bank probably couldn’t sell the house either. There’s no market for it. But the bank should not be able to continue making us look bad, either. The mortgage contract is fairly simple, under the lengthy jargon. We hold the title, you make the payments. If you choose not to pay, we keep the property. We chose the second option. We are waiting for them to meet their end of the agreement. We’ve been told by several others that we ought to hire a lawyer, take legal action, that perhaps by changing the locks the bank has implicitly taken possession of the house, and that it might be an actionable offense. We don’t know what to do. It’s hard, after spending years trying to make this work to no avail. It’s hard to see any purpose in continuing to throw good money after bad. We simply want an end to this. An end to the endless nonpayment reports, an end to the calls, an end to the stress. As I said, it is within our rights. We’re still waiting.

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40 Responses to Email from a reader, on not being foreclosed on.

  1. Beer Numbers says:

    You’re right, it is a moving email. I am genuinely sympathetic to their situation, and the intentional non-foreclosure aspect of it is something I hadn’t thought about. That being said, there are a couple of things that rubbed me the wrong way:
    “None of us made bad decisions on housing.”
    - I’ve read this statement or similar statements at least a dozen times in these types of stories. And my response is, “Yes, yes you did. Putting virtually all of your net worth into an illiquid asset without having any idea of your job stability is an incredibly risky decision.” Maybe (probably? certainly?) it shouldn’t have the negative consequences that you’re experiencing, but the possibility of significant negative consequences should not have been unexpected.

    “The mortgage contract is fairly simple, under the lengthy jargon. We hold the title, you make the payments. If you choose not to pay, we keep the property. We chose the second option. We are waiting for them to meet their end of the agreement.”
    - Obviously I don’t have any knowledge of this particular agreement, but I’d be surprised if that’s what the contract says. I would have expected the contract to say, “You are obligated to make these payments”, not “You are obligated to make these payments OR forfeit the house in full satisfaction of the note”. The difference is whether or not the writer has breached the contract. The language in the email suggests that the writer simply chose an option within the contract, while I think it’s much more likely that the writer breached the contract due to non-payment and is now experiencing the bank’s attempt to remedy the breach. I would be surprised if the contract specified in exactly what way the bank has to attempt to remedy the breach.

    Maybe the difference is unimportant (breach vs. a contractual option), but I believe it’s meaningful in determining whether one party is acting fairly or ethically, which is what I think this post is all about.

    In any event, good stuff to think about and I hope their situation improves. On top of the effects on the individuals involved, it seems obvious that properties lying dormant because of situations like this are almost unambiguously a socially bad thing.

  2. concerned says:

    What happens he stops paying the property taxes? Wouldn’t the county foreclose and force the bank to take action?

  3. Edd says:

    If the property owner stops paying property taxes the bank will in all likelihood pay the taxes and add the amount to the principle balance. Typically the loan agreement will allow for the bank to do that.

    My concern is the bank changing the locks without a foreclosure. That sounds illegal.

  4. Sue says:

    In this state (TX) the city would go to court and get a lien against the house and if sold at foreclosure the new owner would be liable (he’d have to pay before the house could change hands). Put it this way, the title could not change hands before the lien was removed, whoever paid the back taxes and penalty.

    I am not sympathetic at all to the people in the email. I finally lost my sympathy when they decided to have a baby without their financial situation being resolved. That is grossly irresponsible, no way around it. They say they never asked for a bailout but now that is exactly what they are asking for and they want sympathy to boot. If they can pay day care (I know what it costs to have a baby and work) they could have paid a lawyer and got the lowdown on their real situation (there’s a lot we don’t know here and that I bet they’re not telling, but the laws vary from state to state in any case). It’s real estate, it’s cyclical, it’s never different this time, they should man up and stop whinging and get a lawyer. They didn’t like their jobs! Welcome, this planet is called Earth.

  5. Patrick E. says:

    This is not legal advice, but if the bank changed the locks on the property, and they have not foreclosed, then yes, generally that would be trespass to land. Until they foreclose, unless there is some contractual limitation saying that they have a right to do this, that’s trespass, an intentional tort, and it is actionable. The emailer should contact an attorney to help them resolve this situation.

  6. racerx says:

    “…We made some large improvements to the house, remodeling both bathrooms and the kitchen, removing carpet and restoring the wood floors, even down to small details like repainting, replacing all of the electrical sockets, switches, and improving the lawn. ”

    I wonder if this done out of pocket or was there an additional home equity loan.

  7. Frank Schoenburg says:

    This is probably easier said then done. However, I would like for you to change the locks back, rent out the house, and continue not making the mortgage payments. I bet you’ll get foreclosed upon pretty quickly.

  8. Not the Mike You're Looking For says:

    There was a story about this non-foreclosure issue today on NPR–probably Marketplace. I don’t know if there’s any useful information in there (I wasn’t fully paying attention), but it might be worthwhile to check out.

  9. Neil D says:

    I know I’m supposed to feel sorry for the email writer. Buying a house was/is so much a part of our culture no matter your personal economic circumstances. We have this huge blind spot and even now the emailer doesn’t understand his flawed assumptions.

    Blaming the banks for all this is another blind spot. We did this to ourselves.

    The housing market will remain a clogged disaster until we take the losses and restructure. The MBS investors and the mortgage holders are playing a game of chicken with each other. The emailer’s situation is a great illustration of the game.

    While the phone calls are annoying, the emailer seems to be doing just fine. After all, why should his credit rating be good? They can replace their car – pay cash for a used one. There’s that blind spot again.

  10. Rebecca Z. says:

    I, too, am troubled by the idea that the emailer chose to have a family while in this mess; but perhaps there was a biological component to the problem. . .

    That said, they may be able to file a restraining order against the bank/credit collection agencies making the calls; it varies by state law. In my state, this kind of harassment is illegal.

  11. Bruce Wilder says:

    The several commenters, who are fairly unsympathetic to the emailer, trouble me.

    The system is clearly stacked against the emailer, and they are given no viable options, except extreme self-sacrifice, and, yet, there are folks, here, who think the right and moral thing is for them to keep jobs they hate, and forego having a family.

    I think “the system” should be designed to empower people to live their lives, have families, save for retirement, pursue careers. If it is isn’t, that it is has failed. In this sense, our banking system, as reformed through deregulation, has failed lots of people, miserably.

    Asking people to crawl onto a cross, because, with no experience, they made the mistake of buying a house near the peak of the worst housing bubble in 70 years, a bubble created by the malfeasance of the banks, because . . . what’s the point?

    • Neil D says:

      I would argue that the bubble was not just created by the malfeasance of the banks, but by the malfeasance of all Americans. As long as you insist the problem was caused by greedy banks and condo flippers you will have resistance to solving the problem. How can we reward their greed? Every sob story has elements of greed, stupidity, naivete, and entitlement.

      If we were to honestly acknowledge we ALL played a role in this crisis, we might have a chance at justifying the shared sacrifice needed to extract ourselves from this disaster. I wish I could make it all go away, but I can’t.

    • Eric says:

      You can never get the whole story from an e-mail, no matter how complete it may be. But a legitimate question for this family is whether they were under any pressure before they made the decision to change jobs and move. They had an obligation to pay and seemingly had a viable method to pay for it, but wanted to make some lifestyle changes and have discovered that their principle creditor does not want to cooperate in helping them make these lifestyle changes. Since the losses on unpaid mortgage balances is, via several mechanisms, being transferred to to the taxpayers – including renters, owners without mortgages and borrowers current to their obligations – I am puzzled why Bruce is troubled by the lack of sympathy to this story. The borrower had a job that financially seemed to keep his family current on their obligations and decided to cut loose and then not meet their obligations. Boo-hoo.

  12. Stephen says:

    100% Illegal for the locks to be changed by the bank. Change them back and rent out the house. It is still your house until it is foreclosed, so you might as well earn some income on it (that income would outweigh the bad credit in my opinion, so the longer they wait the better for you). And get a new phone # while you are at it. The tennats also will get 90 days notice before being evicted by the bank in the event it is foreclosed, so don’t feel bad for them.

    I am a banker, but I don’t feel bad for whoever is losing money on this deal because it is being poorly managed. Most likely by a servicing company how is improperly incentivized to keep the house delinquent as long as possible so that they will make more fees. Any rational portfolio manager would take a DIL or shortsale and get the heck out… There is no chance of restructure, or even recourse to the borrower personally (non recourse state). What is there to gain by waiting?

    Moral of the story, do what you can to protect your interests. It isn’t your fault if others aren’t.

    I also agree with others that there is no room to whine about the bad credit rating. Learn to live on cash, it will keep you away from the nasty tricks the bankers always play :)

  13. Unsympathetic says:

    Bruce:

    “with no experience, they made the mistake of buying”

    That is the point. I have simply stopped talking about the problems with money, housing, any of that – unless people demonstrate an interest in discussing the ins-and-outs of securitization, the 3C’s of lending, the impact of China pegging currency, etc. Why? Most people believe what they want to believe, regardless of the facts. This couple wanted to believe “everything is going to be OK” – which is fine, until it isn’t.

    Buying a house without a guaranteed income stream is grotesquely stupid, and defending that attitude is an insult to those of us who plan our lives based on things we CAN achive rather than things we WANT.

    The banks are F’d up beyond repair, but as the world moves towards 21st Century Feudalism, unless you take a torch to the bankers’ house, nothing’s going to change.

  14. Andrew says:

    This is a fascinating anecdote, made more so by the comments of many of your readers. It reminds me of the responses to Edward Andrews’ book “Busted.”

    From the limited description of the facts, Andrews’ and his wife’s handling of their own financial situation was even more short sighted than that of this correspondent. But what struck me the most was the degree of disdain and moral opprobrium heaped on people describing their misfortune.

    Reading upthread, we have the correspondent’s behavior described as “grotesquely stupid,” “blind spot,” “grossly irresponsible,” and so on. I don’t see a lot of whining going on in the email: the correspondent has made strenuous attempts to mitigate the situation and accepts that default will have significantly negative consequences (credit history). However, there has to be some balance of harms in a negative outcome; as you write, Mike, that’s something government (courts, Congress) has to have some say in. The correspondent and his family appear to be in a 21st century version of a debtor’s prison, and my understanding of financial history is that getting past debtor’s prisons was a good thing in the 18th and 19th centuries.

    Beer Numbers takes exception to the statement that the correspondent and his friends did not make bad decisions. Well, they got a bad outcome, there’s no question of that – but did they make bad decisions? If you look at it from the point of view of probability distributions (which hardly anybody ever does, of course) their anticipated return distribution probably looked sorta lognormal – no chance of losing money, some chance of making lots. If they’d had excellent foresight, they might have (like Dean Baker, but few others) anticipated a significant chance of losing money – if they’d been strongly risk averse, they might even have stayed out of the market. But it’s not obvious to me that they should have been able to see a substantial probability of a fat tail event with catastrophic economic consequences, nor is it reasonable to think that they could have foreseen that the walkaway option would be blocked by the mortgage holder.

    It also reminds me of Tom Wolfe’s lovely insight in “The Right Stuff” that test pilots believed that crashes would never happen to them – the possessors of “the right stuff” – but only happened to inferior pilots. For many of your commentators, the fate of your correspondent is a cause for censure, not sympathy – he and his wife must have made bad, or irresponsible, or stupid decisions, which of course we wouldn’t make, because we have the right stuff.

  15. Amy says:

    To: Sue from Feb. 5th. I don’t expect you to be sympathetic here. That is not what we are asking, at all! We thought hard and long about things before we decided to have a child and pay the expense of daycare. Hell, I could have decided to be a stay at home Mom, but that is not who I am. I have made my choice to work and pay for daycare instead of sinking that money into a house we don’t live in. My husband and I have been married for 11 years and did not decide to try for a baby until we were married for 10 years. We have been together for a total of 19 years. WE ARE NOT GETTING ANY YOUNGER HERE! I am now in my LATE 30′s. It was a decision to try and not risk all that could go wrong as an older parent. You have NO right to bash us for deciding to have a child. I (we) are trying to move on from our learning lesson the best we can. We learn until the day we die. All sorts of people make mistakes. We are educated people who made choices that did not go as planned. Some of it was our fault and some the economy. We did our best and that is all anyone can do!

    • Neil D says:

      I’m sorry if you took offense at the comments. I usually take these anecdotes and try to draw lessons for society in general as opposed to your specific situation. Hang in there.

      Still, the larger lesson – sorry – is that there is skepticism about individual situations and this hampers our ability to provide assistance. Somehow, we need to get past it but you can clearly see the problem.

      We are not all in this together. In America, it’s every man for himself.

    • Paul says:

      Amy:

      Don’t be defensive. A contract is a legal – not a moral – obligation and the terms are spelled out, including the penalty for default in a nonrecourse state. You’re doing the right thing and, aside from this stress, it’s sounds as if your life (and your husband’s) is going well. I suspect that credit scores are going to be so dinged up by our collective mess that your current difficulties will fade reasonably quickly. Good luck!

  16. najdorf says:

    Stupid and immoral are different things. Saying that reckless homebuyers acted stupidly and are reaping the consequences of poor choices differs from saying that they’re bad people who should be punished separately from their choices and agreements.

    When you buy a house, you own a house. It’s not someone else’s job to deal with it. When you sign a contract to borrow money, you’re in a contract that has terms which you have to live up to. It’s not someone else’s job to deal with it. If you don’t like the consequences, don’t borrow money and don’t buy a house. I haven’t borrowed money; I haven’t bought a house. As a result, I live in an apartment which is not as nice as a house that I could at any point in the past five years have borrowed money and bought. Should reckless/stupid people get the free benefit of living in a nice house without being subject to consequences that they agreed to in order to get what they wanted? Is that a coherent moral philosophy?

    Sure, fight for your interests and use your legal remedies. If the bank violates the contract or collections law, stick it to them. But don’t expect us to cry for you because you took a risk and something bad happened.

  17. cb says:

    That the bank is willing to talk about a short sale is really promising in this case. The correspondant said they have had no offers in the time the house has been on the market (two years?)–there’s a hard truth here: that means the price is just too high. There are one or two places in this country where a house can not sell for even a dollar, but I didn’t get the impression they were in the middle of a free-fire zone in Detroit. And I didn’t get the impression they were trying to sell a one-of-a-kind treasure like Fallingwater, either.

    The price is wrong–and their realtor, frankly, isn’t a very good one if he or she isn’t pointing this out after two years (!) on the market. The market’s haven’t frozen–they just aren’t giving people the prices they want. But value isn’t an absolute–you won’t find the “value” of the house chiseled into the foundation. Value is what a willing buyer will pay a willing seller.

    Again I say to you: the price is wrong–you need to find the right price: one that generates offers within three months or so. If you’re reading this, I really feel for you: you’re in a lot of pain over this. But you need to find a realtor who can set the right price and get offers, and you need to take those offers to your bank.

    I wish you the best. Good luck.

  18. Amy says:

    Again, we are not looking for any kind of sympathy here. We were naive first time home buyers (almost 4 years ago) who thought, they were relocating to a good job opportunity. At the time, that region of NC there was not much in rental property. Since we moved out in 2007; many houses in that area have gone rental because they will not sell. Too many on the market now. Job offers with a PhD were hard to find in 2006 and still tough due to the economy. However, the job offer came with lies the longer we stayed. We learned that many other people left the university too for similar reasons as my husband. At the time, the job seemed great and the housing market appeared to be doing fine. We did not know it was going to get worse (did anyone besides the banks?). In regards, to an earlier response, we did pay for the home improvements out of pocket (no additional loans & did the work ourselves). We decided to move out of NC and back to the Midwest to better both of our career opportunities. My husband has been told by visiting speakers and colleagues that it was good to get out of a bad situation that is not working well. We rented the place a couple of times and it is hard to deal with a rental 24 hours away. Our real-estate agent, so kindly offered and helped us rent until all parties felt there was no hope of anything selling in that area. I honestly, don’t know how agents stay afloat in that region of NC. We knew what was to come after spending months and months renting the place that it would hurt our credit to walk away. Renters would not pay the full mortgage, so we were forking out half of it to hope for a sale. We could have walked away from it at the beginning, but did our best to try to sell it. Maybe some of you don’t think we did our best, but mentally we are a little better this way. We have always paid our loans and had good credit up until this experience. We tried the move, the job and all it has entailed. We have become better educated people on what we should have done differently or not done at all. I am tired of beating myself up over the choice to move and purchase a home in the first place.

    Can any of you honestly say that you are perfect and have never made a mistake? All people young and old make mistakes. Again, we realize that we should have not ever made the move. We should not have bought the house in the first place. However, we are stuck from all the other economical problems that are going on. We all are! I (we) are good people who refuses to let this ruin things completely. We don’t have credit card debt like some folks. We have paid all of our car loans in the past and don’t have one at the present time. We have always been very frugal with our spending until this house purchasing mistake.

    We are just waiting for the house to foreclose to have closure on the situation. It does not make us bad people. We did not hurt anyone except for ourselves here. So many people are in the same “boat” as us. Live and learn, people! Again, we don’t expect sympathy here. Just trying to share an experience. It might just help someone else not make the same mistake.

    I addressed Sue earlier and now to Rebecca Z. Yes, there were biological reasons as to why we did not want to wait to start a family any longer. Life is full of choices and we chose to have our beautiful baby boy over the payments of a house we are unable to sell.

    • Rebecca Z. says:

      Congratulations. I’m happy for your family, and I really do sorrow for your financial woes. (FYI, we just bought a house, and were preparing to move into it, when we discovered it had numerous problems not disclosed or improperly disclosed by previous owners. We’ve had to put it back on this down market at a considerable loss. So believe me, I do appreciate your financial difficulties.)

      Please, as you read these comments, don’t take them personally. We need individual stories to understand what’s happening collectively. There’s the Amy of the story, and we have the right to question her choices; she’s become representative of what’s happening. And then there’s you, and you need to make your own decisions based on what’s best for your family.

      I hope you and your husband and your child thrive in these uncertain times.

      And one last note — being a stay at home mom’s a pretty cool thing to do. I did it, gave up a big pay check to do it, and I’m glad; my kids were pretty outside the norms of the bell curve, and needed my support.

    • Eric says:

      Amy, the truth is that there is a very, very high likelihood that your choices are costing my family, including my young son, money that I could use to pay my mortgage and everything else. Banks got bailed out? What the heck – did it not occur to you why they were getting bailed out? I would have been okay if they had not gotten bailed out, but every dollar that you stuck your bank for is probably getting replaced by a public dollar. The original e-mail makes it sound as if the decision to change jobs was made voluntarily. By going to a job that did not make him too happy, your husband could have continued to make the payments and afford you lovely young son. Instead, you choose to stick it to everyone else in society. And it was a choice, as far as we can tell from the story told by Andrew.

  19. Beer Numbers says:

    It’s interesting to see this discussion continue, especially Amy’s most recent comment:
    “Can any of you honestly say that you are perfect and have never made a mistake? All people young and old make mistakes. Again, we realize that we should have not ever made the move. We should not have bought the house in the first place.”

    What bothered me, and it seems others as well, was the statement in the initial email:
    “None of us made bad decisions on housing. All of us have been caught by the bad decisions made by the banks.”

    It’s difficult for me to reconcile those two statements. The reason that I think it’s so important for people to realize that many housing buyers made bad decisions is that home ownership has been oversold by the vast majority of people (including government), and the recognition that home buyers made mistakes could go a long way towards a more realistic assessment of the costs/benefits of owning a home.

    If people insist on believing that only banks made mistakes, I fear that people will continue to have a biased view of the risk/reward inherent in buying and maintaining a home.

  20. Jeff says:

    Send the bank, by certified mail, a cease and desist letter, requesting no more phone calls regarding this loan, and that any communication be in writing only. If the phone calls continue after you get the signed return receipt back, contact the attorney general’s office in your state. I have worked for collection agencies for 25 years, and if the situation is as you describe it and there is nothing you can do about it, you can stop them from calling. While first party lenders are not strictly subject to FDCPA, the federal collection law, your state probably has a provision to stop the calls, and a judge should be very empathetic should the lender ignore your written request.

  21. Amy says:

    To: Beer Numbers,

    These are my husband’s words and thoughts:

    “None of us made bad decisions on housing. All of us have been caught by the bad decisions made by the banks.”

    I honestly, felt the purchase of the house was a mistake from the beginning, but friends and family told us that we should feel nervous with a big move and as a first time home owner. So, I (we) mistakenly rolled with it. And I say it is a mistake because I still beat myself up over how ignorant we were at the time. A hard lesson learned. We are getting through it and moving on with life.

    But, the lender and banks have all participated in the collective problem of houses not selling. Everyone is at fault to a point. We took out a loan we could afford, but others did not. So, eventually too many houses on the market because folks could not afford them. The abundance of new construction has caused problems with existing structures being able to sell. At least, in the region of NC we left behind us.

  22. Amy says:

    To: cb,

    We dropped the price drastically on the house (at least 4-5 times). We have no problems with the way our realtor represented us. We always competed with other houses on the market. The whole market is bad in the Northeastern part of NC. The last I knew, there were two other houses in the same neighborhood of the house we can’t sell that had no offers too. Also, many other houses have not sold in that part of NC. When we moved there, folks from VA were commuting to NC for work and buying up houses. That changed because of high fuel costs, etc. Our first renters seemed like they wanted to buy, but mislead us and changed their mind. We had people look at the place, but people were not getting approved for loans to even make an offer we could present to the bank.

    Unfortunately, I (we) have walked away and it has brought less stress to not try to deal with renters anymore. Plus, as stated before, we now have daycare costs. We don’t want to keep hoping for the result of an offer and sale. We had a couple hopeful times that ended in nothing from the party looking at the place. Frankly, I don’t deal the the harassment from banks because they call my husband’s cell phone. I have made up my mind that I just want a foreclosure to be finalized and deal with the bad credit. I try to tell myself there is always worse. We have a roof over our heads, we have jobs and can manage with what we have for now.

    • cb says:

      Amy,

      It is very kind of you to reply. As I’ve said, I have a lot of sympathy for you and your position. You made some big mistakes, but you made them on the advice of everyone around you–including the responsible people with the nice suits and the marble-decorated buildings who should have behaved more responsibly. You got a raw, raw deal, and I’m sorry for that and I hope you’re able to close this chapter and move one.

      It is not with the intent of winning an argument with you, but in the honest desire to offer you what I think is the best advice I can that I am going to make so bold with your tolerance as to return to one or two points raised earlier. What concerns me is that you talk about the reductions you’ve made in your asking price as if they were demonstrations that you are not overpriced today. That’s not necessarily the case. The market is a harsh, harsh mistress. If you’ve cut your asking price by 40%, but the market has collapsed to the point that the house’s market value has fallen by 60%, you’re still overpriced. That is just awful, but there it is.

      You know the area better than I do, and you may be convinced that the housing market is just locked up in an unreasonable panic…it may be. But we can be certain that the market was in an unreasonable bubble when you bought. Prices may be about what they are. Are no houses selling at all in the region? Houses sell, even in Flint, Michigan. Would the house sell for ten thousand dollars? Twenty? Thirty? And so on. That sounds mean to me as I write it, but I don’t know what else to say and still be honest with you. You should look not at the houses in your area that _aren’t_ selling, but at the ones that _are_. Those are the ones that will tell you the market value.

      The other point that needs to be made is that, probably, the bank isn’t really under any obligation to foreclose on the property. I obviously don’t have your mortgage in hand, but I checked my own, and it gives my lender the _right_, not the obligation, to foreclose on the property if I go into default. My obligation to them is to make the payments–not to make the payments _or_ surrender the house, as I prefer. Again, I’m not trying to be harsh, and I’m sorry if it sounds that way. We talk about “jingle mail” as if it were a borrower’s option written into the contract, but it’s not. Your lender has determined, be it in wisdom or folly, that their better option at this time is to make your lives miserable by riding you, rather than auction the property. You hate that, I hate that, but there it is. Perhaps they’re overwhelmed with foreclosures, perhaps they think you’ll bring them a better deal than they’ll get at auction, or perhaps they think you could make this work through a combination of renters and personal deprivation.

      They don’t have to foreclose–and if they foreclose ten years from now, after the house has caved in and the property is only worth the land minus a bulldozer rental, you’re on the hook for that much more. You just have to take that on board.

      I know this is just awful for you, and I hope you find a way out of this soon so you can get on with the good things in life. As I said, I wish you only the best. Good luck.

  23. Amy says:

    To: Rebecca Z,

    Glad you found enjoyment as a stay at home mom. But, it is not for me. I want to stay in the workforce. I need the adult time outside of the home. I believe, that daycare is good for my baby. He will be an only child, so he needs the social skills.

    I was a finger-snap away from not trying for another year to see if the house would sell. But, I had a plan and stuck with it due to…NOT GETTING ANY YOUNGER. I put it off long enough and had pressure from family for years to produce spawn.

    OK, I should get back to work and stop posting comments.

  24. Jennifer says:

    I am in this exact situation and I simply don’t know what to do. I had a 3 year ARM on my home. $28,000 down. Payments were fine and I could even afford an increase. Mortgage broker said I would absolutely get refinanced into a fixed rate before the ARM adjusted. The month the payment adjusted my boss retired and I lost my job. I found work quickly but then the ARM adjusted and my payment jumped $800 per month. I coulnd’t make it. I tried. I got a second job. Took weekend cleaning jobs. This was in January of 08. So after about 4 months Countrywide files default and I get the notice of auction sale from the county. I move out because I don’t want my young daughter to witness us being “tossed.” The sale date comes and goes. The sale was Dec. 2008. Come June of 2009 I keep calling to find out about the foreclosure, and finally someone says it was cancelled pending workout. No one has contacted me about working anything out. They say they are sending me a package but it never comes. Another foreclosure sale notice from the county comes and again it is cancelled “pending workout.” I call each week to check status and nothing is happening. They haven’t ever asked for my financial info or anything and I don’t know what they are “working out.” SO basically the house has been sitting empty for nearly two years, I have moved on and I know I am going to take a hit on credit and I would have loved to stay in our home. Now the non-foreclosure issue is looming over my head. What are the consequences of them on them not foreclosing to me? At this point I wish they would just foreclose and be done with it.

    • cb says:

      Jennifer,

      That’s just terrible. The biggest consequence for you is that the house is still “yours” and you are still responsible for upkeep, maintenance and everything else. If and when the bank finally gets around to foreclosing, your liability will be based on whatever the auction price finally is (I’m assuming you’re in a “recourse” state, where the lender can come after you for the full value of the mortgage). So it is absolutely vital that you keep squatters and criminals out of there–mow the yard–take in the mail–repair vandalism. In the very worst cases, non-foreclosed properties have been condemned and even demolished. I imagine a bill for demolition costs from the city is the last thing on Earth you’d want to see.

      From a hard-boiled, dollars and cents perspective, your best option would be to move right back in to the house until it really does sell (I am convinced that these “head fakes” from the bank such as you’ve had are intended to keep people from doing this). I can understand that you want to keep your child from being exposed to this, however. Do you have a friend who you can trust not to wreck the place, and would enjoy rent-free living for an uncertain term?

      Good luck. I’m sorry to hear about the position you’re in.

  25. Tari says:

    Twice the bank changed the locks on the doors to my properties. Before the implosion I was buying and selling homes. I was caught holding two properties when things went bad. I could not sell them, I did rent them for a time but the renters were slackers and either moved out in the night or I had to have them evicted. I fell behind on the note but what I was doing was alternating the payments on the two dwellings. One would get paid this month, the other the next month. If I got one rented they would both get paid. The note was delinquent, one 4 months, the other 3 months. The one 4 months delinquent was in foreclosure, the one behind by 3 months was not. The bank sent someone out to change the locks on the doors at both properties. (Two different Lenders) After I found the locks changed on the first one I called an Attorney to see what my rights were. I was told that if the bank deems the property to be vacant or abandoned they have the right to protect their interest and changing the locks was one way of doing that. I of course immediately changed the locks back because I knew that until the courts awarded the bank the right to take possession it was still my property and I had the right’s to it. I notified the bank that I changed the locks back and each time they sent someone out I would do the exact same thing. Change them back. When I fell behind on the notes I immediately went to the bank to get help. The first time around they denied me saying that help was only for properties the owner actually lived in not rental properties. I wrote a letter telling the bank how idiotic this was and that the reasoning made no sense. If you have a person trying to work things out why not give them a hand. I offered to pay half of the arrears, and asked if the other half could be placed at the back of the loan. They then had someone call me and ask that I submit a hardship package which I had already done twice before. After submitting the third package, I did not hear back fro them. No calls, no notices, they have even stopped sending the monthly statement. The home is still not in foreclosure. When I do send in a payment they are still accepting them. I finally checked my online account which i never do and they have a note under the hardship section that they maybe able to reduce the payoff so that I may possibly sell the home. The dwelling is a 2000 sqft. duplex, I owe around $100K, the duplex next door sold for $16K. My duplex was renovated 5 years ago, the one next door to me was renovated 6 months ago. Unless the Lender is willing to come all the way down to $16K or less I don’t see that option working.
    This type of madness with banks is happening everywhere and I don’t see a change anywhere in site. In some States it can take up to a year for the bank to foreclose. I am in Georgia, after 3 missed payments they can start the proceedings, and 30 to 45 days later it is all over.

  26. Jennifer says:

    I have a somewhat similar situation only I haven’t been in my home for over two years now and BofA won’t foreclose. I moved out right before the first foreclosure auction to avoid embarassment to my daughter and myself (I am indeed embarassed to have lost my home). Apparently the auction was cancelled by BofA although no one told me about it. I called the county a few months later to ask about whether or not there was anything I needed to do regarding the legal stuff associated with foreclosure and they told me it had not been foreclosed. I then started making repeated calls to BofA (Countrywide). They said I had been approved for modification and would be receiving something in the mail. I was thrilled. I could take my daughter home and get her back to her school and friends. I waited and called and waited and called. Nothing came. After 6 weeks I finally got ahold of someone who said they sent the paperwork to the house and since I didn’t respond it was revoked. They know I don’t live there, that I moved out when it was to be sold. They call me at my new home and send my bills here. So then they said they would send again. That was last August. I haven’t been able to get any information. When I call they say it is “pending workout.” But they have never even asked me for any paperwork or income information or anything! What are they working out? It has been two years since I made a payment. The house is sitting there empty. I don’t want to go back unless I know it is certain because I don’t want to uproot my daughter again. At this point I would be thrilled for the foreclosure to simply go through so I could begin rebuilding.

  27. Florida Seller says:

    We have not made payments for 2 years now and still have not been forclosed on. We are currently working on our third short sale attempt. The lender declined the first, and the buyer walked before the lender responded on the second. We just keep on trying as long as the opportunity is present.

    We depleted our IRAs to continue to pay until we couldn’t any longer. Now we owe $30,000 more in back payments, taxes, insurance, fees, etc. and the debt continues to grow each month. Now we are 55 years old with no retirement, it is a very stressful situation.

    • Upsidedown in Oregon says:

      I invested in several rental properties. The economy went very bad here and keeping up on the payments become impossible after draining all our savings. Then both my wife and I lost our jobs after 9 years. So it went from bad to worse.

      BoA sent notices of foreclosure to the houses. This in turn made it impossible to rent. Being unemployed we do not even have the extra cash to keep insurance on the houses while they have messed around for the last two years not foreclosing. So now those houses are no longer insured.

      Frankly I could care less since we will be filing a bankruptcy shortly. We had tried just keeping people in them paying enough to cover the insurance, homeowners association fees, etc. But BoA repeatedly screwed that up. So now their collateral could be destroyed and instead of the hit they will be taking now they potentially could take another one that reduces over a million dollars of property literally to ashes.

      These games they keep playing are ill advised. Anyone with half a brain would know that after two years the person has such bad credit that they really could care less. They should also know that after repeatedly lying to us that we absolutely will do nothing to cooperate with them.

      I came to this topic looking to decide whether or not to once again try and put renters in the houses so they would not be vacant and the property would be at least held safely for them until they took possession. After seeing the ongoing pattern here though I am not going to be dealing with renters getting eviction notices every few months and seeing locks changed.

      I do not care about any sympathy. I also could care less about the bank. They were in business to make a profit and in their greed have lost, as have those who bought houses. But what I do see as amazing in this is how they have repeatedly just kept making a bad situation worse. Having nobody live in these houses puts their risk factor higher and higher. Trying to bully people eventually just creates anger. Those of us who have tried to at least hold the property safe for them are not going to fight them to do it. If the house turns to ashes it is their own fault. Since I am going bankrupt anyway they will have no recourse if they sued me over it.

  28. Pingback: Strategic Defaults and Consumption « Rortybomb

  29. Kevin says:

    Eric,

    I know I am coming in late as I stumbled upon this site. But I have to say that those people condemning the homebuyers really need to get off their high-horse and show some compassion. Seriously. To them I ask, how long would they stay with a job that was not working out? Is it really that easy to simply pass up the opportunity for children (Amy is in her 30′s after all)? Why must monetary considerations trump all decisions (happiness at job, having a family)? Is money really the most important thing in life to you? The suffering endured by this family is not in line with the relatively small mistakes they made.

  30. Bill M says:

    It has been a year since this posted. I was wondering if anything has been resolved? I am in a similar situation. We ceased payment on our home in Georgia in January 2008. As of May 2011 the property has not been foreclosed on and we still receive monthly statements. We did file for bankruptcy in summer 2008, but like everyone else, this delinquency is still showing on our record (regardless of bankruptcy).

    So we, too, are unable to buy a new home or vehicle. BofA has repeatedly told us that the house was going to auction at some point or another but they always pull it just prior to sale.

    I agree that we were irresponsible. I screwed up, I agree, but the bank was “stupid” (or greedy) enough to grant me a loan when they knew my financial situation at the time-so shame on me and them. But at what point are these banks going to hold the American economy hostage. They keep these properties on their “books”, deny the debtors from “moving on” and regaining their financial health and basically encourage a lower quality of life for those living around these abandoned buildings. I’ve taken responsibility for my actions and accepted the consequences (poor credit for 7-10 years, lower quality of life, inability to purchase new home, etc), when are the banks going to take responsibility for their actions? Wake up banks!

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