by Tanta on 3/20/2008 09:07:00 AM
Thursday, March 20, 2008
I suspect this thing in the NYT is going to get a lot of discussion.
They took out adjustable-rate mortgages at the peak of the housing bubble to buy homes they would otherwise not be able to afford. Or they refinanced existing mortgages to take cash out. And now, two or three years later, the day of reckoning is here.It gets worse from there. A lot worse.
These are not lower- and middle-income borrowers, but more affluent consumers with annual incomes of $100,000 or more who are increasingly being ensnared in the home mortgage crisis.
The first step for distressed homeowners, said Rhonda Porter, a certified mortgage planning specialist and broker in Seattle, is to pull out their loan documents and see what they say.First of all, I really want to know what a "certified mortgage planning specialist" is. As a certified mortgage nonsense detector, I call BS. Second, that's the entire paragraph. Besides not noticing the rather savage irony of all these rich folks who are only now getting around to seeing what the loan documents say--so it's not just those dumb poor folk who do that?--there's no indication of what is supposed to happen next. Is it just me, or is there a hint here that the first thing people should do is check to see if there's some way to sue? At the end of the article is a little story that's likely to piss off plenty of readers:
Mr. Geller said he had heard of just one loan balance reduction won by a borrower.A "real estate consultant." (Isn't anyone just a broker anymore?) But what "understanding" of what "state law" did this dude use to get this deal done? Why is the dude "afraid of angering his lender"? He already got his deal . . . ?
That borrower, a real estate consultant in California who did not want to be identified because he feared angering his lender, said he used his understanding of state law to negotiate the refinancing. He bought a condominium two years ago for $450,000 and invested another $50,000 for improvements. His ARM had a 5.5 percent initial rate that was soon resetting to 7.25 percent. But his condo is now worth only about $350,000.
His lender agreed to give him a 6 percent fixed-rate mortgage and, he said, to knock $135,000 off the principal.
The agreement came only after he stopped paying his mortgage for two months. “I am very happy and grateful to the lender because what I owe on my condo now is in line with its worth,” he said. “I’m ecstatic.”
Then there is this:
Borrowers should determine if they live in a state with nonrecourse laws. In general, lenders in those states cannot pursue borrowers for money owed. But these laws are complex and change often, so consulting with a lawyer may be necessary, Mr. Geller said. He has compiled a list of nonrecourse states at www.mortgagerelief formula.com/recourse.I'll go for state foreclosure laws being complex, but changing often? Really? Like, how often? My impression has been that some of our recent troubles stem from the fact that foreclosure laws haven't changed in a lot of places since the Depression. Anyway, I was interested in that list because I have been asked for one several times. The link in the NYT piece is not formatted properly; try this. What you will get is simply a list of states with non-judicial foreclosure processes. Labelled "non-recourse mortgage walkaway states." Is this Geller simply incompetent, not understanding the difference between non-judicial foreclosure and antideficiency statutes? Or is he just trying to jump on the same bandwagon of youwalkaway.com? And how did he get to be a source for an article in the NYT, giving him "credibility" and free publicity?
I suggest spending a few minutes with Mr. Geller's website:
If you can get the lender to approve your short sale, you can walk away pretty much unscathed. You can have good credit. You can even fix any negative reports they may have made about you, reports that say you were late. And you won't face any more of those huge loan payments. You'll be free and clear, baby!Of course you don't get the "details" of how this works unless you "download the report," and I am not sure my PC is well-enough protected to do that. But after the short sale, we get to Mr. Geller's advice for what to do now that you no longer own a home:
But first you gotta get there. The way to make sure that the lender says yes is to give the lender *exactly* what they need to see . . .
The way to sell your house quickly is to follow the formula I call the Sell Your House in Nine Days system. It is also called the round robin. . . .
The key here is convincing them [the lender] that the short sale price is right. They rely a lot on a broker's price opinion, or BPO. And there is a whole system of ethically and honestly convincing the broker that the selling price is a fair one. If the broker reports that your short sale price is fair, the lender will probably say "yes."
The shocking secret of how to buy without qualifying and without getting on the hook for a loan . . .Yes, this is the bucket of scum that the reporter has given credibility to on the pages of the Grey Lady. Is there left an editor who, to paraphrase Jackson Browne, still knows how to cry?
Here's the deal you are looking for. If you are in an area with $150,000 houses, find a house where the motivated seller has a $150,000 mortgage. And then buy the property "subject to" the existing mortgage.
It really is that simple. The seller moves out. You settle at the lawyer's office. Nobody tells the lender anything. You start making the payments.
The loan is still in Mr. Seller's name. Is that a problem? No. You are the owner. You have a grant deed on file at the county courthouse in your name. No problem at all.
Anyone can sell their house to someone else as long as they are still the owner, and title will transfer. Even if there are loans still on the house. Doesn't matter.
So in this situation, Mr. Seller signed a deed over to you. You checked the loan balance (punching in Mr. Sellers' loan number into the mortgage company's automated robot phone system) and now you have the keys and you have every right and privilege as the owner that Mr. Seller did.
But look what you did. You have the mortgage interest deduction which lowers your taxes. You own the house, lock stock and barrel. But you never had to get your own loan.
Many sellers will want you to pay off the loan. Of course they will. But they are motivated, remember? So you tell them that you aren't going to do that just yet. When will you? Maybe in a year or three. Maybe in five years. A motivated seller can be convinced to sell to you because they are relieved that someone else is stepping into their shoes. It's human nature to breathe a sigh of relief and let someone else (you) deal with the mortgage.
And it's as simple as that. There are wrinkles to this and things you should know, but it really isn't that hard.
Please do go back and take note that the anecdote of the borrower who scored the $135,000 principal reduction turns out to be a story "Mr. Geller heard of."
Posted by Tanta on 3/20/2008 09:07:00 AM