Saturday, November 29th, 2008 at 12:48 PM
Loan Mod Stories
If you want to see another big reason why loan modifications aren’t going to save the real estate market, just read this article to get a sense of how borrowers feel ‘entitled’ to a better deal from their lender:
http://www.contracostatimes.com/business/ci_11075735
The stories:
Roy Risk, who owns a house in Solano County, said a recent offer from Wachovia was no deal at all. Risk and his wife paid $921,000 in 2005 for a home, financing it with a $736,000 World Savings loan. Wachovia later inherited those loans. Their house is now worth $580,000, based on an appraisal in October.
Wachovia’s offer? A first mortgage of about $580,000, at a fixed rate of 5.4 percent, with a 30-year loan term. So far, so good. But Wachovia also insisted on a second loan of $175,000 — to cover the difference between the current value of the house and the loan balance of around $755,000.
The Risks discovered their new payments would increase by $500 a month. “What’s going on here?” Risk said. “Are they going to help people or are they not?”
Mark Gagliardi has sought for months to rework his loan with Countrywide on his Oakley home, but to no avail.
Gagliardi and his wife bought the house in 2006 for $768,500 and obtained two Countrywide loans totaling $691,000. Homes nearby now sell for $410,000 to $450,000.
“There is no way to refinance because there is no value left in the house,” Gagliardi said. “We are hanging on by the skin of our teeth. We admit our part in this. But Congress did its job. The president did his job. Now the banks are dragging their feet.”
Gagliardi wants a 30-year fixed-rate loan based on his home’s current value. He has gotten nowhere with Countrywide, despite placing many calls to the firm.
“Countrywide is not proactive,” Gagliardi said. “No calls, no follow-ups. When I call, I get put on ignore.”
Sue Chai Spaulding wants Bank of America to restructure a $250,000 equity line of credit on her Berkeley home. She got the loan to help buy a San Francisco house.
“They don’t want to help you,” Spaulding said. “But they shouldn’t take this so lightly. These are people’s lives. They have been rude to me.” She has retained a lawyer.
A new Community Reinvestment Coalition study found that foreclosure remains the most likely outcome for people whose homes are under water. Counseling agencies the coalition surveyed all said principal reductions are uncommon.
Oakley resident Rachelle Gonzales started a loan workout process in May with American Home Mortgage. In September, the lender rejected the deal.
“It’s so frustrating,” Gonzales said. “They say they’ll help. Then they say no. They have called me names. They have called me a slime. This has been awful. Just awful.” Her loan is now delinquent.
Karen Mims sought for more than a year to convince her lender, Aurora Loan Services, to modify the $509,000 loan on her Oakland home. The payments are too high.
“I have desperately tried to work things out,” Mims said.
Mims was told she would be helped. But Aurora rejected a new loan although Mims was on a payment plan. On Nov. 12, Aurora foreclosed on the loan. She remains in her house of 11 years.
“This is my home,” Mims said.
Yolanda Chatham of Antioch is baffled because Countrywide won’t help. Her problem? She pays her loan on time.
“They suggested I get one or two months behind in my payment,” Chatham said. “Their solution was to mess up my credit.”
Risk, of Solano County, urged lenders to become more flexible or face new woes. “I’m ready to let (Wachovia) have the house,” Risk said. “See if they can get $580,000 for it.”
He says it’s frustrating to see those he believes created the crisis receive help while he and his wife are ignored by lenders.
“They better be careful because those of us at the back of the line just might create the new foreclosure crisis,” Risk said.
Posted on Saturday, November 29th, 2008 at 12:48 PM in Loan Mods | 30 Comments » | 
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While it’s easy to point fingers at the government and lenders for the lack of regulation and nonsensical loan approval processes, all these things were supposed to do was prevent borrowers from taking out loans they couldn’t afford. Ultimately, “those who created the crisis” are those who borrowed money they couldn’t afford to pay back. The way to “save the real estate market” is to get homes selling for their true market value, and the sooner we get past this “save peoples’ homes at all cost” nonsense and start foreclosing en masse, the sooner the “crisis” will be over.
GeneK | November 29th, 2008 at 1:18 pmWelcome back Gene – how ya been?
Jim the Realtor | November 29th, 2008 at 1:26 pmI’m so sick of owners who acted like idiots, overpayed for their homes, and are now holding out their grubby little paws for free money. Let them go bankrupt.
ToadB | November 29th, 2008 at 2:14 pmI have to agree with ToadB. I feel like many of these people “gambled” by buying an overvalued house. Yes, there was plenty of real estate industry schmoozing involved such as “buy now or be priced out forever…yada…yada…yada.”
But there are many of us out here who never took the bait. We read, we educated ourselves and we saw the bubble for what it was…a massive credit fueled balloon just waiting for a pin prick. So, let them go bankrupt. Don’t re-write the loans, don’t reduce their principal. The quicker we get this over with the quicker prices will come down to where the median income can buy the median priced home.
dukes | November 29th, 2008 at 2:42 pmI would love to hear just one homeowner say: “I paid too much for my house. I listened to the NAR and my mortgage broker. I was an idiot. I only blame myself.”
Jakob | November 29th, 2008 at 2:45 pmThe whole thing has such a surreal tinge to it. You have to keep reminding yourself that basically what’s going on is:
* Roy Risk wants Wachovia to give him $175,000.
* Mark Gagliardi wants Countryside to give him $320,000.
* Sue Chai Spaulding wants Bank of America to give her $250,000.
* Dwip wants the tooth fairy to give him $275,000.
OK, I slipped the last one in there, but seriously! What makes these people think their banks have any sort of moral, ethical, or legal obligation to simply give them hundreds of thousands of dollars? And yet they act as if they’ve been wronged when the banks decline to do so. Talk about a culture of entitlement.
Dwip | November 29th, 2008 at 2:49 pmThe problem is that they’ve completely blocked out the time tested cure for these situations; foreclosure. Foreclosure is a solution not a failure of the system. In my opinion trying to get around (cheat) the existing system could cause it to fail in surprising ways. Just exactly happens to lending when there’s no recourse available to lenders for failed borrowing?
Rob Dawg | November 29th, 2008 at 4:37 pmI think I would have enjoyed life more in Dickens’ era. I long for the return of debtors’ prisons…
greenlander | November 29th, 2008 at 4:42 pmUnbeliveable. I’ve been stuck renting for 9 years because people like this bid up the price of housing. Now they want 100K to 250K gifts from the government (you and me) as a reward for speculating. Let’s home if they get their wish they are stuck in their debt traps for years. Of course that will never happen because they can always just walk away or wait for hyperinflation. In the final analysis, you can’t make people trust each other. Or can you? The government (you and me) are now guaranteeing loans. So what to keep a desperate auto company from loaning money to anyone for a car if you are going out of business anyway? Same thing for retails. Who cares how much you discount your inventory if you are going to go BK in January?
Where do I opt out of this system?
oc bear | November 29th, 2008 at 4:44 pm“They better be careful because those of us at the back of the line just might create the new foreclosure crisis,” Risk said.
This line is my favorite. Who exactly is this guy threatening? The foreclosure crisis hasn’t ended, and you’ve always been a part of it, buddy. If you’d like to cut to the front of the line, by all means go for it!
The Blur | November 29th, 2008 at 5:46 pmI am LMAO at the homeowner logic.
If I was the decision maker at the bank,
I’d throw the owners out on their ear, sell the property bank owned and therefore take the hit but obtain the actual asset value in cash to do whatever with. The owners staying in the home in an absolute losing proposition for whomever the noteholders are.
RESET.
In this case the reset (REO sale) is a much more prudent descision for the Risk Manager at the bank due to values decreasing another 8-15% before stabilization.
It sucks for the bagholding prior homeowner but reality now is much better than fantasy now or in the future and the reality is those homes may NEVER again see the original purchase value at least in our lifetimes.
You can argue that point until you are blue in the face but I’d plunk down a $50,000 cash bet today that the original value those bagholders paid won’t materialize until 2020 AT VERY BEST.
REALITY | November 29th, 2008 at 6:26 pmThe guy’s name is “Risk”… Does it get any better than this?
Rational expectations | November 29th, 2008 at 6:46 pm“Foreclosure is a solution not a failure of the system.”
Thank you Rob. I am so sick and tired of listening to all the whine stories about “it’s my home… bah wah wah… ” – nope, it’s not, unless you can actually pay for it. If you can’t, you give it back to the bank. And what is that horrible thing that will happen to them now? They will have to RENT! OMG, how terrible. I don’t know how I’ve survived it for my entire life.
Simone | November 29th, 2008 at 8:01 pmThese same folks would be bragging about their net worth had the bubble continued to inflate. I bet the majority lied about income and have insane DTI ratios.
Anonymous | November 29th, 2008 at 8:16 pmThanks for the link, Jim. I inducted them all to my blog.
The Aguiar Estate:
If you locate the house, streetview shows a ‘yard/junk’ sale at the house next door. LOL
This POS might be worth $300K at the bottom. Today’s deal is tomorrow’s drowning victim.
xxxx (xyz) Dr Fremont CA 94538
3 beds, 2.0 baths, 1,104 sq ft
Sale History
12/16/2005: $587,000
08/26/1998: $234,000
$587K for 1100 sq ft!!!
Tyrone | November 29th, 2008 at 10:09 pm$533/sqft!!!
Hey, maybe the 20-dumbthings are starting to figure it out…
Over-indebted to credit
Matt Sauer, a young, single mortgage broker, planned to get rich quick after graduating from college. By age 28, he owned properties in Pacific Beach, Las Vegas and Florida.
Mark Miller, a San Diego bankruptcy lawyer, is seeing the fallout. His offices are buzzing with young couples, many facing foreclosure and some owing as much as $200,000 on credit cards.
“We have finally gotten over the concept that debt equals wealth,” Miller said. “I’d get guys coming in with their arms crossed, saying, ‘I’m only here because my wife dragged me in.’ Now I am seeing capitulation.”
But… Suzanne researched it!! LOL
Tyrone | November 29th, 2008 at 10:25 pmI can’t believe how jacked up peoples’ sense of entitlements are. Grrr.
I especially like the woman who lived in her house for 11 years, and the bank foreclosed on her loan.
If she bought the house in 1997 then the price and payments should be relatively low. It’s interesting that the article doesn’t mention that she must have sucked the equity out of her house sometime within those 11 years.
garbler | November 29th, 2008 at 10:29 pmI have a relative that’s trying to get a loan mod simply for the sake of getting a free discount. Yes she’s on the margins, but everyone is trying to get a mod because they can. Very few deserve it any more than I would deserve a check for $50,000 to help me buy a home. Everybody has a sob story, and I’d hate to pay taxes so it can go towards someone else’s house.
BDiego | November 29th, 2008 at 11:31 pm“They have called me a slime.”
ROFL. Truth hurts. It’s a pity you can’t fix stupidity.
I don’t think I want one of these ‘homes’ you speak of anymore. I’d like some loan forgiveness on the new car I just bought though. Maybe if I skip a couple of payments and cry about how I was suckered in?
These jackasses can be forgiven right off of a cliff for all I care.
Genius | November 30th, 2008 at 3:23 am“Are they going to help people, or not?” I hope not. I think it might be fair to let the survival of the fittest take place. Hell, when my house burned down you did not see me moping around looking for free money. Let the foreclosures continue and let new people take over the properties.
What a bunch of whimps we have cultured.
pruvolo | November 30th, 2008 at 10:18 amAll this talk about people underwater having this entitlement just make you getting upset.
What about this? Let talk about how to game the system using whatever mean you can? That way whoever in power reading this will understand their action will bankrupt not just the underwater homeowner but also the whole country. Maybe then they will listen to people doing their due diligent regarding to their mortgage.
I have a home and it’s not underwater. I will try to get as much money out as possible based on my current income. After a few months, I will ask my wife to quit her job and then our LTV will be out of our paying capacity. Then I will ask my lender to modify my mortgage. Will this work? Of course, I don’t know how to hide my borrowed money so that bank won’t see it and call my bluff.
rbresident | November 30th, 2008 at 10:20 amI guess “Risk” was in Roy’s name so he couldn’t resist. I’m sure Roy took the risk on a low interest teaser loan in hopes of making a big return. It’s the same story over and over played out across California (including friends of mine)… They told me “I didn’t get a fixed loan because I couldn’t afford the payment.”
This means YOU COULDN’T AFFORD THE HOUSE WHEN YOU BOUGHT IT!!!
People like Roy should be foreclosed on… the Bank is offering to lock in his rate and try to help him out without them taking the hit. It wasn’t the bank or any of their employees that purchased Roy’s house… it was Roy.
Should we now apply the same rules to everything we purchase? I bought my Yukon XL January 2008 and eliminated a few of the bells and whistles because it put the price higher than I wanted to pay… however, with GM in dire straights I could get that same vehicle for a lot less today. Maybe I need a GM bail out for paying too much for my truck?
Enough, already… I’m tired of hearing sob stories about someone buying a 1.5 million dollar home in Olivenhain on a 2.9% teaser rate that now find they can afford the home when the rate adjusted.
BOO HOO… I could afford the fixed rate either at that time and that is why I didn’t buy it.
I’M TIRED OF HEARING THIS OVER AND OVER AGAIN ABOUT HOW PEOPLE THAT ARE COLLEGE EDUCATED, PURCHASING MORE THAN THEY CAN AFFORD, FEELING DUPED…AND NOW WANT OTHERS TO TAKE RESPONSIBILITY. YOU GAMBLED AND YOU LOST… LIVE WITH IT.
Randy | November 30th, 2008 at 1:14 pm“I would love to hear just one homeowner say: “I paid too much for my house. I listened to the NAR and my mortgage broker. I was an idiot. I only blame myself.””
This brings to mind something that hapened when I was twelve years old. My mom and dad sat my brother and me down and explained to us that that year’s holidays might be a lot less than what were were accustomed to, and we were old enough to be told why. Earlier in the year Dad had taken a job with a company that had been represented to him as an “up and comer,” but had turned out to be not, and he was now going to be unemployed at the end of the year. When my brother and I expressed our anger at the people who had misrepresented the state of their company to Dad, he stopped us and said that while it was understandable that we might feel that way, ultimately it had been he and our mom who had discussed the job offer and had decided to take it, and that even if the decision had been based on false promises by others, the responsibility for its consequences was still theirs.
Things turned out ok that year. Dad found another job before the holidays that turned out to be the place he stayed until he retired. But our lesson about taking responsibility was still learned.
GeneK | November 30th, 2008 at 2:41 pmGreat story GeneK. Sounds like you had wonderfully loving parents.
The beautiful thing about taking responsibility for everything that happens to you is that you are now in control, instead of someone else. I hope I can teach my children to take 100% responsibility for their lives.
Jakob | November 30th, 2008 at 4:51 pm“Risk, of Solano County, urged lenders to become more flexible or face new woes. “I’m ready to let (Wachovia) have the house,” Risk said. “See if they can get $580,000 for it.”
____________________________
And this is what it comes down to, isn’t it? All the rest of the chatter about fairness and morality is only just so much white noise. Guys like Risk can and will put it right on the line to the Wachovias of the world. Write down the principal to the FMV and put me in a low fixed rate or take the house, suckas. And good luck selling it for more than I will agree to mod into. Enjoy those carrying costs. And many thanks for the free 6-8-10-12 months of free livin’.
The Wachovias of the world lose either way. The Risks of the world win either way. It’s up to the Wachovias to determine which way hurts less.
As for principal writedowns, Senor Bernanke has been imploring lenders to write down principal since last spring. He believes principal writedowns are the best way to address the problem. He is on record with this. Now we see that the Fed is going to purchase $500 billion in securitized paper. What do you think Ben is going to do with defaulting loans on the Fed books? That’s right.
RSS | November 30th, 2008 at 4:59 pmAmen Jakob. If I end up procreating I have a very similar aim.
Genius | November 30th, 2008 at 7:08 pmThe Wachovias of the world lose either way. The Risks of the world win either way. It’s up to the Wachovias to determine which way hurts less.
I’d take $550,000 in cash today rather than a loan mod to $580,000 paid at low interest rates, from a bad credit risk over 30 years. I bet Wachovia looks at them, and wonders what the upside to loaning this guy any money is.
JordanT | December 1st, 2008 at 3:17 pmThe logic of these loan mods escapes me. I suppose if I was Countrywide and had actually written the bad mortgages I might feel some responsibility for helping the borrowers to not default because I had previously declared them capable of paying, but if I was Wachovia and had “inherited” bad mortgages, my goal would be to determine what the homes are really worth today, foreclose the nonpaying borrowers out of them, sell them to new owners who can afford conventional mortgages with 20% down payments, understand that the homes they’re buying today may go down a bit more and are ok with that because they want the houses to live in and not as “investments,” then write the losses off ASAP before they get any bigger. Why would I want to do anything to help nonpaying borrowers stay in their homes if I had nothing to do with putting them there in the first place?
GeneK | December 2nd, 2008 at 10:16 amI agree with #27 here about “what is the upside to lending this guy money?”
I have thought for about the past year that the best business to open today is a lending institution who helps upside down owners get into a less expensive home. You may think this is crazy but allow me to explain:
Several people are walking away because they view their home as an investment which is losing money, they have a ridiculous DTI ratio, they can pretty much do it without any consequence other than damaged credit, and they can pocket several thousand dollars as they live rent free for several months before the foreclosure. This doesn’t necessarily make them a bad credit risk, but a selfish (and perhaps smart) investor. I would offer a program in which people would agree to stop paying on their current underwater home, put the saved mortgage payments into an escrow account which would be used to either pay down debt or use as a down payment (likely both). This would ensure that the DTI ratio is more reasonable, the house would be more affordable, and the risk of the loan would be considerably lower and the new owner would actually have some skin in the game. This sort of business would have to be a private investor who had the ability to discriminate between borrowers who they deem to be legitimate and scammers and would only work if they were not subject to the fairness in lending act. The home loan (which would really be a huge personal loan) would almost have to be a recourse loan to eliminate the “walk away” risk. I know that there are several people who behaved badly and foolishly in the past few years but there is also an abundance of prime borrowers who just don’t want to see their investment continue to plummet and would not walk if they had more to lose. I don’t know if this would be legal to do but I think that it could really save a lot of people and be quite lucrative at the same time. Just an out of the box and purely hypothetical thought.
Partyboy | December 2nd, 2008 at 1:40 pmIt was the banks/lenders that came up with all of the creative loan programs designed to get more people into more homes I don’t think you should have to have a degree in economics to buy a home so you could foresee what all of the bank created loan programs would cause. The main thing most of the banks looked at in approving a loan was could it be packaged and sold on wall street so they could make more money then wall street made it bigger and easier by marketing subprime to the investors that were borrowing money to make money now all of or most of the people that made the most money on this crap are getting bailed out and you people bitching about the whining homeowners and the whining homeowners are going to pay to save the people that screwed you both with your taxes and social security which was already doomed might as well kiss it goodbye now. It sure is funny how we let corporations and politicians get away with this but we tried to impeach a president for cheating on his wife.
Cynthia | January 4th, 2009 at 12:44 pm