Friday, July 25, 2008

The "Foreclosure Crisis" and Exploitation of a Suicide

by Tanta on 7/25/2008 11:50:00 AM

This is an extremely distressing story: a woman faxes a suicide note to her mortgage servicer on the day the foreclosure sale is scheduled, and is dead by the time the police arrive.

Distressing for anyone with what I take to be a normal sense of human decency, that is. To the local and now national media, it seems to be catnip. Carlene Balderrama's personal tragedy is in danger of becoming an indelible urban legend of the Great Predatory Foreclosure Crisis, uncomfortable facts be damned. The tenor of the reporting, of course, makes anyone who expresses any skepticism about the media's line on this sad event sound inhuman. I have been telling myself since I first saw this story that only a fool would try to steer a course through the rock of credulousness or the hard place of callousness. But I guess it's my job to be a fool today.

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The Boston Globe got the thing underway on Thursday:

TAUNTON - The housing crunch has caused anguish and anxiety for millions of Americans. For Carlene Balderrama, a 53-year-old wife and mother, the pressure was apparently too much.

Police say that Balderrama fatally shot herself Tuesday afternoon, 90 minutes before her foreclosed home was scheduled to be sold at auction. Chief Raymond O'Berg said that Balderrama faxed a letter to her mortgage company at 2:30 p.m., saying that "by the time they foreclosed on the house today she'd be dead."

The mortgage company notified police, who found her body at 3:30 p.m. The auction had been scheduled to start at 5 p.m., when bidders showed up at the house and found it surrounded by police cruisers.

But, unbeknownst to buyers and to Balderrama, the auction had been postponed by the time she grabbed her husband's high-powered rifle, O'Berg said.

Balderrama left a note for her family, saying they should "take the [life] insurance money and pay for the house," O'Berg said. The chief said he did not know, however, if the family would be able to collect on the policy in the event of a suicide.
Those appear to be facts. Then we get this:
Joe Whitney, who works with Balderrama's husband, said that she handled the bills in the household and that the husband was unaware of the foreclosure.

"John didn't even know about it; that's the surprise," Whitney said outside the home, where he had come to comfort the family. "It's just one of those awful, awful, tragic events."

John Balderrama did, however, file for Chapter 13 bankruptcy three times from 2004 to 2006, but the courts dismissed the petitions. Debtors who declare bankruptcy under Chapter 13 generally can keep their homes while paying off their debts under a court-approved reorganization plan.
Something doesn't add up here. Nonetheless, the reporter is undeterred:
As Congress rushed yesterday to help 400,000 strapped homeowners avoid foreclosure and prevent Fannie Mae and Freddie Mac from collapsing, the suicide underscored the potentially devastating toll of the housing crunch.

Bruce Marks, chief executive of the Neighborhood Assistance Corporation of America, said it is not uncommon for homeowners to contemplate suicide when they cannot keep up their mortgage payments. Marks's group counsels homeowners in crisis and responds to such crises by immediately notifying the police, he said.

"What gets us so angry is that people blame themselves," Marks said. "They can't see past their sense of responsibility to see the responsibility and the predatory nature of these lenders. The fact of the matter is, unless something dramatic happens, there's going to be more and more people like her taking their lives."

Police believe that when the Balderramas bought the house in a stronger market, the family chose an adjustable rate mortgage, confident they would be able to keep up the payments. But as the housing market plummeted and the rates rose, the family fell behind, O'Berg said.
We have Bruce Marks, who should be ashamed of himself, labelling Balderrama's mortgage lender a predator. We have a cop making claims about the terms of the mortgage loan and the sequence of events leading to the default--claims that the reporter could have verified by searching the public records. (Note: I have not examined the Balderrama's recorded mortgage documents, because the North Bristol MA Registry of Deeds requires creation of an account with an account fee and a $1.00 per page charge for the documents. I am not inclined to spend $15 to see a copy of their mortgage, but I'm inclined to wonder why the Boston Globe isn't so inclined.) But we get even more from the co-worker and the cop:
Whitney said he did not believe that Carlene Balderrama had a history of mental illness.

"It looked like a happy couple," Whitney said. "That's why John was so blown away. Nothing medically ever came up, and I've known them for 20 years."

O'Berg said he was troubled that the pressures of foreclosure had triggered suicide on a street that he described as solidly middle-class.

"That's the real sad part: This is a middle-class family, a husband working, the son is working," O'Berg said. But the housing crunch, he said, "is inflicting real pain on middle-class Americans.

"Put yourself in her shoes," he added. "You handle the finances, and you're hiding everything from family. It's a lot of pressure."
Why are two people who are neither psychologists nor economists so eager to convince us that the primary cause of this suicide was "the foreclosure crisis"? Since when do the local cops become your go-to sociologists?

The Boston Herald on the same day provided some facts that rather confound this narrative:
John Balderrama bought the three-bedroom house at 103 Duffy Drive in October 2002, using a $220,255 mortgage to cover most of the $232,000 purchase price, public records show.

But less than eight months later, PHH initiated foreclosure proceedings - usually a sign that a borrower is at least 90 days delinquent.
The Herald does not confirm that the mortgage loan in question was an ARM, but it certainly casts doubt on the idea that rising interest rates and plummeting house prices had anything to do with the Balderramas' difficulties with their mortgage.

According to the Herald, John Balderrama filed Chapter 13 bankruptcy petitions in 2004, 2005, and 2006. I did spend some time looking at these bankruptcy filings, which are available to anyone with a PACER account and the willingness to spend 8 cents a page. In all three filings, the only debts listed for Balderrama were a single mortgage on the house and a car loan. There are no unsecured debts and no undischargeable or "priority" debts. There are no catastrophic (or even modest) medical expenses or debts. In fact, in all three filings, the only debt to be paid through the Chapter 13 plan is the arrearage on the mortgage, which seems to have been around $27,000 in the first filing and around $44,000 by the last one (in April 2006). Otherwise, each plan indicated that Balderrama would pay his approximately $1700 house payment (that figure includes taxes and insurance) and $289 car loan directly to the creditors during the BK. Each plan indicated that there were no assets above exempt amounts.

The only real difference among the three filings is that Balderrama's income kept increasing substantially, meaning that in each filing the required payment to the trustee kept increasing. In the first filing, he claimed gross monthly income of $6,202, which resulted in a monthly repayment plan requirement of $527 (in addition to the regular monthly car and house payment). (The Herald story reports his net (after tax) income instead of gross.) By the third filing, the gross monthly income was $10,461 and the plan payment was $1066. As far as I can tell, Balderrama never made more than one plan payment during any of these BKs. It's hard to tell whether the mortgage payment was made post-petition, but in at least two of the BKs the post-petition car payment didn't get made. All the bankruptcies were dismissed due to either failure to make payments to the trustee or failure to attend hearings or creditors' meetings.

I have to say that these were a very strange set of BK filings. Carlene Balderrama never appears as a debtor, or even as a spousal signatory. (Did Carlene even know about the BK filings? It makes more sense that she would be in the dark about the BKs than that her husband was in the dark about the mortgage arrearage.) Although the household income keeps rising, there are no increases in bank accounts or other debts or assets that can account for where the money goes every month. In the first BK, filed just over a year and half after the purchase of the home and a year after the first foreclosure attempt, Balderrama's debt-to-income ratio as a mortgage lender would calculate it was 41%, including the Chapter 13 payment. By the last BK, the DTI was 29%. There is no indication that Balderrama's mortgage payment increased; in fact if the debtor's filing is correct it decreased (from $1740 in the first filing to $1703 in the last).

It seems quite obvious that these filings were intended solely to stay foreclosure rather than to deal with crippling debt payments and reduced income. Yet Balderrama never cooperated with the court or made an effort to make payments, resulting in serial dismissals. Even on the assumption that the household budget in a Chapter 13 is often unrealistically tight, I just can't see from the paperwork why the Balderramas couldn't pay their house and car payment and the arrearage installments.

Are these folks debt-bingers? Apparently not. They've had exactly two debts in the last six years: a house payment and a car payment. Did they buy an overpriced home with a mortgage that instantly went upside down? It doesn't look like it. If Zillow is to be believed, the mortgage has never been upside down and was probably quite close to break-even when the foreclosure was completed (including arrearages in the loan amount). Victims of job loss or serious illness? Doesn't look like it. Victims of a predatory lender squeezing them with an exploding ARM in a falling RE market? The BK paperwork suggests that that claim is ridiculous.

Nonetheless, by this morning ABC news got ahold of the story. A new detail:
But for one reason or another, it appeared that Carlene Balderrama decided to deal with the family's flagging finances on her own. O'Berg [our ubiquitous cop quote-bot] said that according to Balderrama's husband, John, Carlene handled all of the family's financial matters.

"I had no clue," John Balderrama told The Associated Press on Wednesday, adding that Carlene had hidden from him the fact that she hadn't paid the mortgage in 42 months.
Mr. Balderrama filed two bankruptcies during the last 42 months. But he had no idea his mortgage payments were in arrears? Are we supposed to believe that Carlene Balderrama forged her husband's signature on the BK filings and suborned the perjury of at least one attorney? How else do we square this claim of ignorance with the BK records?

Little details like that, however, don't stop the ABC reporter or his psychologist quote-bots:
"Suicide is certainly a response to hard economic times," noted Dr. Harold Koenig, professor of psychiatry and behavioral sciences at Duke University Medical Center in Durham, N.C. "Consider what happened when the stock market fell in 1929. There was a rash of suicides."
Well, John Kenneth Galbraith labelled that "rash of suicides" a "myth" in 1955, and if anyone has more recent hard data that says otherwise, I'd like to see it. Before we construct another myth about the Great RE Crash of 2008 with the same kind of "data."

I do not doubt for a moment that Carlene Balderrama was under severe psychological stress. Whatever kept her going through six years of an inability to make her mortgage payments, clearly the reality of the day of foreclosure sale was too much to bear. What I do object to is the transformation of this story into an urban legend about "predatory lenders" and the effects of an RE downturn based on no evidence whatsoever. I object to these reporters' unwillingness to deal with the facts available to them that surely complicate this currently popular narrative. I object to cops running off at the mouth with unsubstantiated claims and a husband and his co-worker heaping blame for the family's financial woes on a dead woman who can no longer defend herself, and I surely object to it when it gets used to slander a mortgage servicer who was, apparently, the only party involved who ever took this woman seriously enough to call 911.

If anybody can explain to me how this series of reports on Carlene Balderrama's suicide are anything other than exploitation of her tragedy in order to support an overwrought rhetoric that sees every foreclosure that has occurred in the last year or so as "predatory" and "unnecessary," then please do so in the comments. I am not seeing it.

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