From SFGate:
Jose Vega was on the phone with JPMorgan Chase in April negotiating a loan modification when a real estate agent knocked on the front door of his Pittsburg house and said it had been repossessed in foreclosure a day earlier.
“I literally handed the phone to him and said, ‘Why don’t you tell this guy from Chase?’ ” Vega recalled. “It’s obvious the system is broken and needs to be fixed. The Chase executive handling my case didn’t know about the foreclosure.”
A proposed California law, SB1275, seeks to prevent similar situations by requiring lenders to give a decision on loan modifications before starting foreclosure proceedings.
A similar provision took effect Tuesday for banks complying with the federal Home Affordable Modification Plan, or HAMP, but the California law goes a step further by specifying that borrowers can sue lenders that foreclose in violation of the bill’s provisions, which also include detailed notification rules.
“Having a clearly defined consequence makes it more likely, we hope, that the servicers will avoid making the mistake in the first place,” said Paul Leonard, director of the California office for the Center for Responsible Lending. “Despite their best efforts, servicers continue to have capacity problems where the left hand doesn’t know what the right hand is doing.”
Beth Mills of the California Bankers Association said the industry opposes the bill because it addresses a moving target, HAMP.
“We think it would be a mistake for the state to codify HAMP when this is a program that has evolved and changed dramatically since it was first announced,” she said. “A couple of months from now, we could see new directives for HAMP.”
Banks against damages
Banks dislike the bill’s provision allowing borrowers to sue and receive up to $10,000 or treble damages.
“We’re extremely opposed to any sort of private right of action,” Mills said. “We feel even if minor technical violations may occur, it would be an avenue for borrowers to sue and further delay the foreclosure process even if they’re ineligible for a loan modification.”
State Sen. Mark Leno, D-San Francisco, who is the bill’s co-sponsor along with Senate President Pro Tem Darrell Steinberg, D-Sacramento, said the legislation is needed because HAMP doesn’t hold servicers accountable even when they act improperly.
“We know there will still be foreclosures, but we want to make sure there are no preventable foreclosures,” he said.
Helping borrowers
About 25 to 30 percent of loans are not subject to HAMP, so the bill would widen the pool of borrowers who might get assistance, Leno said.
The bill is expected to be heard in the Senate Banking Committee today to consider updates made to it when HAMP regulations changed. Under legislative rules, it must pass a Senate floor vote by Friday to stay in play.
Another foreclosure prevention bill, AB1639, passed the Assembly Appropriations Committee on Friday and is expected to be heard on the floor this week.
That bill would “establish a monitored mediation program to help homeowners and lenders reach sustainable loan modifications,” according to the office of Assemblyman Pedro Nava, D-Santa Barbara, who sponsored it along with Assembly Speaker Emeritus Karen Bass, D-Baldwin Vista (Los Angles County).
Continued extentions of the free rent program….
Another potentially tragic step in the wrong direction.
Wow… Lets protect the “rights” of the deadbeats. While young people with jobs struggle to buy a houses.
This type of mentality is going to kill California. We can’t all be government workers. Someone needs to pay the tax bill.
Notice which party both bills come from
SB1275 = Sen. Mark Leno D-San Francisco and Tem Darrell Steinberg, D-Sacramento
AB1639 = Assemblyman Pedro Nava D-35th District
The whole “left hand doesn’t know what the right hand is doing” is a legitimate problem, IMHO, although this probably isn’t the way to solve it.
Of course, the real solution is to PAY YOUR MORTGAGE PAYMENT YOU MORON. If you don’t, expect the bank to (eventually) take your house.
Strangely, I find myself thinking that a fundamental problem with the foreclosure and short sale stuff is that there are too many complex rules, and that adding more will probably not help resolution or remediation.
“Of course, the real solution is to PAY YOUR MORTGAGE PAYMENT YOU MORON. If you don’t, expect the bank to (eventually) take your house.”
Another, probably more fundamental approach:
http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff
More seriously, I don’t have any personal insight, but if the bank’s policy is only to renegotiate after payments have been missed, people’s options are going to be limited in that regard.
You rule shadash!!!!!!!!!!!
Those poor innocent homeowners!
“but if the bank’s policy is only to renegotiate after payments have been missed, people’s options are going to be limited in that regard.”
That’s a risk you must take if going for a loan mod. If you are going to break the contract by not paying your mortgage, you might lose the house, even if you are renegotiating. Heck, what happens if the loan mod is actually denied? You will be liable for all the payments you missed, plus penalties, plus interest. The chances of you having all of that is close to zero-so you lose the house anyways.
The government seems to still be under the mistaken impression that people who are getting foreclosed on actually want to keep their houses.
Most don’t–or they want a reduction in payments so low it would shave off 50% of their principal.
The bill doesn’t address this common scenario.
-Erica
Yeah shadash b/c the republicans have been great stewards of the economy, free market and not doling out favors to rich supporters.
Takes a lot of govt cheese to actual people to reach 350bn given to markets. But we needed to save them….yeah right
This kind of stuff is killing our economy and our ability to deploy capital effectively.
As soon as our foreign creditors lose faith in US Treasuries the game will be over. We’ll all be headed into a world with a much lower standard of living.
Erica,
This proposed bill isn’t about keeping people in their homes.
It’s about delaying the repricing of homes. Legislators believe that if you can put some pain off, that it gets better. Just look at budget negotiations.
As we all know, magical pink ponies will swoop in to fix the economy and bring business to a deeply conflicted and anti-business state with a small problem of earthquakes, crushing taxes, and high labor costs.
Something tells me it isn’t going to be like 1983 again, but try telling that to a person who has been suckling at California’s teat since then or the owner of a budget sign business that does well when new business start. To them, this is all part of the cycle. None of them feel any pain, because, you know, you have to have a soul to feel that.
greenlander – it isn’t that Treasuries are a safe/good investment, its that its the best of the worst. There is no ‘better’ investment to safeguard principal.
Just like our dollar is getting ‘stronger’..it isn’t. The others are just imploding.
Its like the best looking dog in an ugly dog contest…still ugly
You know, the tone on this blog is quite predictable. Every time one of these stories comes out, the person who is in financial distress is a “deadbeat”. That’s really quite silly. Whether or not you think legislation is the answer, situation like the one described in the article are ridiculous. Companies renegotiate debt they cannot pay all the time, we don’t call them deadbeats, we call them businessmen. The person is trying, presumably in good faith, to negotiate a solution to a problem. Meanwhile, all their efforts are for naught because the house is being foreclosed on while the loan is being modified. If anyone thinks that kind of story shows a well-functioning process, then you’re idiot.
The onus is on the party in the contract with access to all information and masses of capital (the banks) and it should be. Why does the banking industry need legislation that insists they keep track of what is going on with their loans in the first place? Same reason they needed a law to, get this, require by law that they verify the borrower can actually repay. The need for ridiculous laws is becuase the banks are stone cold incompetent.
Most people are in trouble because they could not stop refinancing their home ATM. I know of many who have owned their homes over 15 years and are losing to foreclosure. People didn’t think that they had to repay all this debt? It’s time to pay up or get out.
To Former RB Resident:
Remember that the golden rule is that he who has the gold makes the rules. A common variant of that is the saying attributed to Donald trump: “you owe the bank thousands, the bank owns you; you owe the bank millions, you own the bank.”
You see, petty homeowners are deadbeats because they have no power(gold). Part of the problem in America today is that everyone thinks they are little trumps running around and the world should bend to them. It won’t and it shouldn’t.
They’re a fool if they think they can force a bank to a renegotiation of a contract they didn’t fulfill their portion of and have no power of more pain. That’s called bringing a knife to a gun fight. He’s a deadbeat because he’s a fool. If he had paid his bills, he would have some negotiating power; he has none because they know he won’t pay and they can just liquidate for more money now.
Calling him a deadbeat is not a value judgement; it’s stating they have no negotiation room in a world where negotiating room is the only form of power.
Chuck
Former RB Resident,
Try and distort the truth all you want with sob stories. Here’s the dictionary definition of Deadbeat.
http://www.thefreedictionary.com/deadbeat
dead·beat 1 (ddbt) Slang
n.
1. One who does not pay one’s debts.
2. A lazy person; a loafer.
adj.
Not fulfilling one’s obligations or paying one’s debts: a deadbeat homeowner.
the tone on this blog is quite predictable.
I’ll address that one.
I keep putting these articles on the blog, and tolerate virtually all comments about them, for a couple of reasons:
1. People have suggested that letting off some steam here helps them cope better.
2. If the day comes that revolution becomes necessary, the case will have been made here for months and years – and we will have the militia ready.
From Calculated Risk, an actual piece of research that shows why all of this delaying of foreclosures is COUNTERPRODUCTIVE and wastes taxpayer money in the end. Bottom line is that if politicians wanted to legislate wisely, they would require modification to be requested and granted or denied within the first 120 days of default, and require foreclosure (i.e. Trustee Sale in California) to take place within 270 days of initial default (this is 150 days after the initial notice of Trustee Sale).
Here’s the post from CR:
Housing economist Tom Lawler alerted me to a 2008 research paper by Freddie Mac economists Amy Crews Cutts and William A. Merrill: Interventions in Mortgage Default: Policies and Practices to Prevent Home Loss and Lower Costs. They studied the foreclosure time lines and costs in several states and found that 270 days is sufficient time to allow the borrower to cure, and any more time actually incentivizes the borrower to strategically default:
“There are many challenges that policy makers, investors, servicers and borrowers face in minimizing the incidence of home loss through foreclosure. Among them is the tension between too little time in the foreclosure process, such that some borrowers are unable to recover from relatively mild setbacks before they lose the home but investors minimize pre-foreclosure time related costs, and too much time in the foreclosure process, such that the borrower is incented to let the home go to foreclosure sale during which no mortgage payments are made (in essence, free rent for a significant time) and investor costs rise rapidly.
…
A sweet spot for the optimal time in foreclosure likely exists around a statutory timeline of 120 days (the current national median, and equivalent to 270 days after adding in 150 days for pre-referral loss mitigation activities by servicers through workouts) in which the borrower’s incentives are aligned with both a high probability of curing out of the foreclosure and keeping the pre-foreclosure costs to the investor contained.”
One of unintended consequences of the government foreclosure delaying strategy (probably aimed at limiting supply and supporting house prices), is that strategic defaults have gained fairly widespread acceptance. And that means the eventual cost to the taxpayer will be higher than if the lenders had either modified the loans, or foreclosed, or approved a short sale, within about 270 days.
Count me in for the militia.
I took off the ‘road noise’ post because the buyer’s agent called, and it’s been in escrow for 20 days, over list price.
How many failed laws do we need to pass every year before they stop asking for “one more law” to do what all the other laws were claimed to do? The only net effect is free rent for deadbeats.
Renters and honest homeowners get nothing out of this law.
Shadash, my dictionary goes one better: “Deadbeat – A person who deliberately avoids paying debts.”
We’re not talking about someone down on their luck, there’s karma at work here.
A very interesting Court of Appeal case was published yesterday, Mabry v. Superior Court
http://www.courtinfo.ca.gov/opinions/documents/G042911.DOC
The issue surrounds interpetation of one of the first of California’s recent mortgage relief statutes. Here is a quote from the case summary:
“Civil Code section 2923.5 requires, before a notice of default may be filed, that a lender contact the borrower in person or by phone to “assess” the borrower’s financial situation and “explore” options to prevent foreclosure. Here is the exact, operative language from the statute: “(2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.” There is nothing in section 2923.5 that requires the lender to rewrite or modify the loan.
In this writ proceeding, we answer these questions about section 2923.5, also known as the Perata Mortgage Relief Act :
(A) May section 2923.5 be enforced by a private right of action? Yes. Otherwise the statute would be a dead letter.
(B) Must a borrower tender the full amount of the mortgage indebtedness due as a prerequisite to bringing an action under section 2923.5? No. To hold otherwise would defeat the purpose of the statute.
(C) Is section 2923.5 preempted by federal law? No — but, we must emphasize, it is not preempted because the remedy for noncompliance is a simple postponement of the foreclosure sale, nothing more.
(D) What is the extent of a private right of action under section 2923.5? To repeat: The right of action is limited to obtaining a postponement of an impending foreclosure to permit the lender to comply with section 2923.5.
(E) Must the declaration required of the lender by section 2923.5, subdivision (b) be under penalty of perjury? No. Such a requirement is not only not in the statute, but would be at odds with the way the statute is written.
(F) Does a declaration in a notice of default that tracks the language of section 2923.5, subdivision (b) comply with the statute, even though such language does not on its face delineate precisely which one of the three categories set forth in the declaration applies to the particular case at hand? Yes. There is no indication that the Legislature wanted to saddle lenders with the need to “custom draft” the statement required by the statute in notices of default.
(G) If a lender did not comply with section 2923.5 and a foreclosure sale has already been held, does that noncompliance affect the title to the foreclosed property obtained by the families or investors who may have bought the property at the foreclosure sale? No. The Legislature did nothing to affect the rule regarding foreclosure sales as final.
(H) In the present case, did the lender comply with section 2923.5? We cannot say on this record, and therefore must return the case to the trial court to determine which of the two sides is telling the truth. According to the lender, the borrowers themselves initiated a telephone conversation in which foreclosure-avoidance options were discussed, and there were many, many phone calls to the borrowers to attempt to discuss foreclosure-avoidance options. According to the borrowers, no one ever contacted them about nonforeclosure options. The trial judge, however, never reached this conflict in the facts, because he ruled strictly on legal grounds: namely (1) that section 2923.5 does not provide for a private right of action and (2) section 2923.5 is preempted by federal law. As indicated, we have concluded otherwise as to those two issues.
(I) Can section 2923.5 be enforced in a class action in this case? Not under these facts. The operation of section 2923.5 is highly fact-specific, and the details as to what might, or might not, constitute compliance can readily vary from lender to lender and borrower to borrower.”
Is it possible to finance a Bentley with an interest only or ARM? I’d like a GTC to drive for a few years and then give it back to the bank? You folks wouldn’t mind pitching in a few cents to help pay for it would you?
Seriously, let the market set the price on these homes and let’s move on. Keeping prices inflated is only going to keep us renting longer.
In the end you must afford your home to live in it. For those who can’t, move aside and let those who can in.
I took off the ‘road noise’ post because the buyer’s agent called…
Did he say “huh?” repeatedly? 😉
Up the militia!
I think you guys really are missing the reason the government is doing this. 1) To give the public the illusion they can fix this mess. And more importantly 2) Try and save the banks. They have at least two and a half more years of these garbage loans coming due. Banks are low on capital and cannot continue to sell houses at such high loss rates. So, the government is forced to try and keep the property values as high as possible. Which is nuts in and of itself since the unresonably high property values were at the center of the bubble in the first place. So, lots more cheese and free rent for the irresponsible and high prices for investors.
“2) Try and save the banks. They have at least two and a half more years of these garbage loans coming due. Banks are low on capital and cannot continue to sell houses at such high loss rates. So, the government is forced to try and keep the property values as high as possible.”
From what little I know and can surmise, this hits the nail on the head. Obama, Timmy, and the gang honestly feel that the best way to handle this mess that we’re in is to not let housing prices fall too much more. Their position is not devoid of logic. I certainly don’t understand enough about economics to say that they’re wrong. However I’ll also say that the US government, as big as it is, propping up the US housing market doesn’t feel like a viable plan, but my feelings could easily be affected by my own self interest.
See, you guys have proven my point. He was trying to pay his debts through a loan mod. That doesn’t make him a deadbeat, that makes him responsible. And, I won’t even address the insulting idea that he’s a loafer just because he’s having financial hardship.
Here are a few number of reasons why a person could need a loan mod.
1. Sold crappy product by unethical broker that he couldn’t afford, or didn’t understand, and later couldn’t afford when it reset.
2. Lost job, can’t find new job. (I’m sure this doesn’t happen to anyone.)
3. Bought house he never have afforded in a thousand lifetimes, then cashed out the Equity ATM and moved to Aruba.
The assumption around here seems to be that everyone in default is #3 and should be shipped off to debtor’s prison. Fairly ridiculous.
Now, as for whether loan mod or foreclosure relief legislation is a good idea, that’s a legitimate discussion. I respect CR quite a bit, but I do think allowing rapid, massive foreclosures to occur could have some very negative effects on the communities in which these occur. But, its a legitimate discussion on the policies around real estate rather than pelting debtors with tomatoes.
And, lastly, Jim, I should have been more specific. I meant the tone on the blog comments are predictable. You post an interesting story, and I see it as another example of how f’d up the situation is for people trying to find a way out of it. Shadash and many others see it as another example of someone who should be tossed on the street.
Demonizing the suckers at the bottom of the pile is the same old smoke and mirrors that lets the kleptocracy continue to rob everyone blind. “It’s not the cronies running the Savings and Loans into the ground, it’s the welfare queens who are destroying this country” just rehashed. Yawn.
The continuing lesson of piling on to the suckers/deadbeats is that one should never ever believe any “expert” in financial matters or real estate matters. Ever. To do so is to expose yourself to ridicule and blame for all society’s ills. Everyone needs to realize this and act accordingly. The loan broker? Liar. The real estate agent? Liar. Appraiser? Shiftless toady. Bank? Total theives. So, where does learning these very important societal lessons leave long-term house prices?
I think people have me wrong…
I’m a firm believer that actions = reactions
Take foreclosing on a house as an example action. What are some of the possible reactions?
1. When a person is foreclosed on they go through a series of negative / uncomfortable actions. (debt collectors, repossession, loss of house, etc) The logical reaction to this process is if they ever purchase a house again they’re going to be much more cautious.
2. When a bank is forced into the action of foreclosing on a property with a deadbeat “homeowner”. The most logical reaction by the bank is to be more cautious when lending out money. (or pushing risk onto the taxpayer but that’s a different story)
3. When a renter takes the action of living responsibly. The reaction by the bank should be to reward this person with a loan for being a more desirable client. By foreclosing on the deadbeat “homeowner” the bank has now made available an asset the renter that has taken the action of living responsibly can now buy.
Now take the action = reaction example the other way.
1. Instead of foreclosing on Deadbeat “homeowner” the bank takes the action of letting them live in the asset for free. The reaction by the deadbeat “homeowner” will be to try and drag out the free rent as long as possible.
2. When a bank is not forced into the action of foreclosing on a property because they have other ways to generate revenue (tarp). The logical reaction by the bank is to lend out $$$ in more and more crazy ways because it doesn’t matter if it ever pays it back.
3. When a renter takes the action of living responsibly. If there is no reward for living responsibly the action is for people to get pissed.
Concur 100% with shadash’s post.
Not only does it make the renter “upset,” it makes the renter think that the next time an opportunity like the housing bubble presents itself, go all-in, because “they” won’t let you fail as long as you’re running with the herd.
——————–
As to the objection to the deadbeats being labeled “deadbeats,” how would you feel if you were a landlord and your tenant lost his job and stopped paying his rent?. How long do you think you should have to deal with his non-payment? If after a year of NO rent payments you try to evict him, how would you feel if the media was in your face telling you how ruthless you were for evicting the unemployed tenant? How would you feel if legislators created laws to protect the tentant so that you were not allowed to evict him for years…or that forced you to cut the rent by 20, 30, or 50%? Would you have the same compassion for this renter that you seem to have for the deadbeat “owners”?
Some of us try to live well within our means and try to keep our fixed costs down. This means paying less for housing. During the bubble runup (and now, still) these “deadbeats” were outbidding us because we were being conservative (which means accounting for potential periods of unemployement, sickness, emergencies, etc.) while they were throwing caution to the wind. Now, we’re supposed to feel sorry for them?
Sorry, but barring true medical emergencies (cancer, stroke, etc.), I just can’t muster up any sympathy for these DEADBEATS. They will simply have to rent for awhile. They don’t seem bothered by the fact that their irresponsible overbidding forced us to rent. Why should we feel sorry for them?
The bottom line here is that statistics have shown loan modifications are a huge failure and are just delaying the inevitable. If someone didn’t read their mortgage and can’t pay the adjusted payments, a loan mod isn’t going to help. They likely can’t afford the house. If someone loses their job, a loan modification is not going to get them the income the solution. They can no longer afford their house. If someone has too much debt–unless they are just having cash flow issues–a loan modification isn’t going to help. The problem here is that people have too much debt and a loan mod that doesn’t reduce principal or lower the interest rates isn’t going to help (and most loan mods don’t do either, as I understand it)