Some Banks Walking Away from Home Foreclosures 31 comments
March 31, 2009
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As a result of both decreasing home values and increasing legal fees, some banks are deciding to not take possession of properties in foreclosure (see New York Times article). In addition to legal fees, homes in foreclosure are seeing increasing maintenance fees, due in part of vandalism and neglect. The problem is that once the bank walks away, the name of the homeowner is still on the title, making them responsible for maintaining the home.
Even if the home is to the point of being demolished, the homeowner may be responsible for the cost of demolition and clean-up. It looks like the banks are indeed getting some of their problem loans off the balance sheet, but this may not be the way the Fed and Treasury had in mind.
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On Mar 31 09:56 AM Bull Run wrote:
> The reason Canada did not have America's morgage problem?? Pretty
> simple. Canadian banks are responsible for their morgages. When a
> CDN bank underwrites a morgage, it has to eat it.Only in America,
> can a bank pass off a morgage it just underwrote to a Wall Street
> Pimp, that turns them into CDO's and insures them withCDS's, then
> slips them out the door into Grama's retirement fund. America's morgage
> busines was just another Ponzi scam.More Garbage in, More Garbage
> out, until they ran out of Garbage.
On Mar 31 09:56 AM Bull Run wrote:
> The reason Canada did not have America's morgage problem?? Pretty
> simple. Canadian banks are responsible for their morgages. When a
> CDN bank underwrites a morgage, it has to eat it.Only in America,
> can a bank pass off a morgage it just underwrote to a Wall Street
> Pimp, that turns them into CDO's and insures them withCDS's, then
> slips them out the door into Grama's retirement fund. America's morgage
> busines was just another Ponzi scam.More Garbage in, More Garbage
> out, until they ran out of Garbage.
And who enabled those same bankers to make those risky loans?
-The credit rating agencies- Moody's, Standard & Poors, etc.
-The Chairman of the SEC, by not enforcing laws;
-Senators Dodd and Frank
WHOMEVER is responsible NEEDS to be HELD accountable. (sorry for shouting.............but it seems a lot of people/media miss this point.)
On Mar 31 08:35 AM Joe Adamaitis wrote:
> I am one of those who does not agree with the banks position as I
> find myself always reminding everyone of who began this entire mess.
> Sure we can go to the hedge funds, Wall St., bad brokers and borrowers
> etc., however I always come back to my 4-5 simple questions:
>
> 1. Who sat down and created the "No Doc, Stated and Pay Options Arms?
>
> 2. Was it borrowers, brokers, realtors?
> 3. Who provided the endless hours of risk analysis?
> 4. Who sold this crap to the American public? (how about wholesale
> and correpsondent reps (OF BANKS) armed with cash in their pockets
> to wine and dine a lot fo brokers to sell their programs!)
> 5. Now that the damge is done and fingers are pointing in every direction,
> isn't it really the banks who have turned their backs on people who
> are now stuck in 100% loans, with no equity, and possibly no job
> due to the snowball affect caused by the same banks and financial
> genesis's who created the insane concepts in the first place??<br/>
>
> Yes, yes, yes, I know, we can blame everyone we want, but bottomline
> is if there were no such products in the first place we wouldn't
> be here correct?
>
> Keep in mind, many of us in the industry never had a problem asking
> for pay-stubs, W-2's, proof of income, assets etc. We were only allowed
> to write loans accroding to what Fannie and the secondary market
> said we could. If they said pay-stubs etc, we asked for, recieived
> and submitted or else no loan. When it changed, they opened the door
> for every Tom Dick and Harry to waltz in with no experience and poof,
> they're mortgage pro's making 6 figures!
>
> Ask yourself who underwrote and had the final approval power of these
> toxic loans? Was it the broker, Realtor, borrower?
>
> Ok, I have said enough. Time to get off the soap box. I hope some
> of you can see where I am coming from. You cannot create a situation
> and then turn your back on it as is what's happening here today.
> Step up and take the responisbiltiy! Hmmmm, now there's a word not
> many Bank CEO's probably like to hear these days!
Where are you now? With two foreclosures in your immediate neighborhood, what is happening to your own home value? What if you have to refinance or if you lose your job? Point is, we are all in this together whether we like it or not, and believe me I don't like it a bit myself.
On Mar 31 08:38 AM Johnaudio1 wrote:
> I can't afford to pay for the mistakes of people who bought homes
> they can not afford. Period. I just can't. My family is already on
> the brink. You can not get blood from a turnip. I am broke. I am
> NOT in debt, but I am broke. If the plan is to drag me down into
> the sewer of debt, them I vote "NO!". My CC debts are manageable
> because I chose to keep them manageable. My house payments are affordable.
> My house has fallen down too. I am on the brink. PLEASE... do not
> drag me into debt!
They were used to taking advantage of excessive tenant protection laws and now maliciously vandalize and strip their homes expecting that it will become someone else's problem as usual. If some stay in their homes and make a go of it after a bank abandons it, I wish them luck. Many who find their vicious acts catch up with them will deserve it.
With all the foreclosures already in process, never mind all the ones which have yet to hit which is expected to be millions more as all these zero equity interest only lair loans hit market, there is no way a bank will be able to handle them all, so it only is logical many will not bother, just right them off as loss, after all, isn't our tax payer money going to bail out all these greedy banks anyway.
Short-Sale-Cash
On Mar 31 09:56 AM Bull Run wrote:
> The reason Canada did not have America's morgage problem?? Pretty
> simple. Canadian banks are responsible for their morgages. When a
> CDN bank underwrites a morgage, it has to eat it.Only in America,
> can a bank pass off a morgage it just underwrote to a Wall Street
> Pimp, that turns them into CDO's and insures them withCDS's, then
> slips them out the door into Grama's retirement fund. America's morgage
> busines was just another Ponzi scam.More Garbage in, More Garbage
> out, until they ran out of Garbage.
Thanks for posting this. I missed the NY Times article.
One thing no one has mentioned is the imputed income of a cancelled loan. If someone retains ownership of a property when a mortgage is cancelled, the principal is considered taxable income by the IRS. If someone has a $60,000 mortgage cancelled and retains ownership of the property, the IRS expects $60,000 added to AGI. The clean-up or demolition expense is only part of the added liability. The new obligation could be a significant percentage of the principal of the cancelled mortgage. If foreclosed, the borrower is excused from the imputed income.
smalltownbanker - - -
You wrote:
<<<In Georgia any bank that does not want the property could simply cancel the Security Deed instead of foreclosing. This does not cancel the debt but eliminates even the security interest in the home and therefore the right to foreclose on the property.>>>
Does this change a non-recourse loan into a loan with recourse? This sounds much different from the usual treatment of mortgage debt (secured non-recourse contract). Can this happen in any other states?
Johnaudio1 - - -
You wrote:
<<<I am NOT in debt, but I am broke. If the plan is to drag me down into the sewer of debt, them I vote "NO!". My CC debts are manageable because I chose to keep them manageable. My house payments are affordable.>>>
I am confused. You have house payments and CC debts but you are "NOT in debt". Can you explain? Or are you just in denial?
What is driving all of this is all of us. You have the poor demanding benefits and the politicians promising them in return for votes. You have the government printing money in order to be able to tell those of a more conservative-gee-I-wou... conservatives that they can pay less taxes, all the while banks are doing CDOs and creating mythical spun sugar castles of assets in the air. When it all falls, they want the govt to make them whole with tax dollars.
Until the average American understands money, monetarianism and just what capital IS, it will only get worse.
Let it all fall, let those who actually PRODUCE do so, and eventually the economy will recover.
All we are doing now is numbing the patient, the economy, with drugs, more debt, saying they are getting better when they are just getting numb.
Barney Frank &CO. set up the Community Reinvestment Act , forcing them to make bad loans.
When the banks balked , the same Barney's used Fannie Mae as a junk depository for the bad loans , so now the banks didn't care about quality , because they closed em and sold em off to FM.
This led to huge real estate broker , appraiser , seller , and buyer fraud , cause nobody cared.
Meanwhile , FM officials collected countless millions in bonuses , but were actually becoming insolvent -
But Barney came to the rescue and claimed FM was in fine shape when Bush and McCain REPEATEDLY called for an audit by the only entity regulating FM -
Congress. Frank refused and voted down audit/oversight legislation.
Meanwhile , AAA investment securities were carved out of these loans which weren't really AAA cause they had junk loans as a part of em.
But the rules let em call em AAA cause they were divided into "tranches".
And AIG insured this garbage figgerin they'd never have to pay off.
When all this junk collapsed , AIG couldn't pay off on the insurance they'd written , thus the bailout.
BUT-It's duh banks??????
Sure it is - along with all the rest of em.
Don't turn your backs on em like they were useless junkies. Trust me Barney and Chrissie Dodd and the rest of those smucks haven't got a clue and when I use the words "the banks" I do encompass all the scumbuckets that went along with ithe entire deal. I just don't want to see them use the system and us to avoid paying back.
On Mar 31 01:56 PM waldipup wrote:
> Funny the banks are blamed , when you or I would have done the same
> if we had the opp.
>
> Barney Frank &CO. set up the Community Reinvestment Act , forcing
> them to make bad loans.
>
> When the banks balked , the same Barney's used Fannie Mae as a junk
> depository for the bad loans , so now the banks didn't care about
> quality , because they closed em and sold em off to FM.
>
> This led to huge real estate broker , appraiser , seller , and buyer
> fraud , cause nobody cared.
>
> Meanwhile , FM officials collected countless millions in bonuses
> , but were actually becoming insolvent -
>
> But Barney came to the rescue and claimed FM was in fine shape when
> Bush and McCain REPEATEDLY called for an audit by the only entity
> regulating FM -
>
> Congress. Frank refused and voted down audit/oversight legislation.
>
>
> Meanwhile , AAA investment securities were carved out of these loans
> which weren't really AAA cause they had junk loans as a part of em.
>
>
> But the rules let em call em AAA cause they were divided into "tranches".
>
>
> And AIG insured this garbage figgerin they'd never have to pay off.
>
>
> When all this junk collapsed , AIG couldn't pay off on the insurance
> they'd written , thus the bailout.
>
> BUT-It's duh banks??????
>
> Sure it is - along with all the rest of em.
On Mar 31 08:35 AM Joe Adamaitis wrote:
> I am one of those who does not agree with the banks position as I
> find myself always reminding everyone of who began this entire mess.
> Sure we can go to the hedge funds, Wall St., bad brokers and borrowers
> etc., however I always come back to my 4-5 simple questions:
>
> 1. Who sat down and created the "No Doc, Stated and Pay Options Arms?
>
> 2. Was it borrowers, brokers, realtors?
> 3. Who provided the endless hours of risk analysis?
> 4. Who sold this crap to the American public? (how about wholesale
> and correpsondent reps (OF BANKS) armed with cash in their pockets
> to wine and dine a lot fo brokers to sell their programs!)
> 5. Now that the damge is done and fingers are pointing in every direction,
> isn't it really the banks who have turned their backs on people who
> are now stuck in 100% loans, with no equity, and possibly no job
> due to the snowball affect caused by the same banks and financial
Go to the source( the creator), not consumers.
The same with the drugs, gun, drunk drivers.
When you to solve and resposible, go to the source the creator of the mess, toxic stuffs.
On Mar 31 08:35 AM Joe Adamaitis wrote:
> I am one of those who does not agree with the banks position as I
> find myself always reminding everyone of who began this entire mess.
> Sure we can go to the hedge funds, Wall St., bad brokers and borrowers
> etc., however I always come back to my 4-5 simple questions:
>
> 1. Who sat down and created the "No Doc, Stated and Pay Options Arms?
>
> 2. Was it borrowers, brokers, realtors?
> 3. Who provided the endless hours of risk analysis?
> 4. Who sold this crap to the American public? (how about wholesale
> and correpsondent reps (OF BANKS) armed with cash in their pockets
> to wine and dine a lot fo brokers to sell their programs!)
> 5. Now that the damge is done and fingers are pointing in every direction,
> isn't it really the banks who have turned their backs on people who
> are now stuck in 100% loans, with no equity, and possibly no job
> due to the snowball affect caused by the same banks and financial
> genesis's who created the insane concepts in the first place??<br/>
>
> Yes, yes, yes, I know, we can blame everyone we want, but bottomline
> is if there were no such products in the first place we wouldn't
> be here correct?
>
> Keep in mind, many of us in the industry never had a problem asking
> for pay-stubs, W-2's, proof of income, assets etc. We were only allowed
> to write loans accroding to what Fannie and the secondary market
> said we could. If they said pay-stubs etc, we asked for, recieived
> and submitted or else no loan. When it changed, they opened the door
> for every Tom Dick and Harry to waltz in with no experience and poof,
> they're mortgage pro's making 6 figures!
>
> Ask yourself who underwrote and had the final approval power of these
> toxic loans? Was it the broker, Realtor, borrower?
>
> Ok, I have said enough. Time to get off the soap box. I hope some
> of you can see where I am coming from. You cannot create a situation
> and then turn your back on it as is what's happening here today.
> Step up and take the responisbiltiy! Hmmmm, now there's a word not
> many Bank CEO's probably like to hear these days!
On Mar 31 09:56 AM Bull Run wrote:
> The reason Canada did not have America's morgage problem?? Pretty
> simple. Canadian banks are responsible for their morgages. When a
> CDN bank underwrites a morgage, it has to eat it.Only in America,
> can a bank pass off a morgage it just underwrote to a Wall Street
> Pimp, that turns them into CDO's and insures them withCDS's, then
> slips them out the door into Grama's retirement fund. America's morgage
> busines was just another Ponzi scam.More Garbage in, More Garbage
> out, until they ran out of Garbage.
The timing of these walkaways is the main issue. It is reasonable for the governing municipality to secure these properties, provide minimum exterior maintenance, and assess at a professional rate.
But when negative value is likely, the lender has responsibility even though usually mot written in law.
My forecast is that City and County governments will address this issue as their particular circumstances dictate. But there is no "one size fits all" solution.
On Mar 31 10:08 AM optionsgirl wrote:
> FYI-You can only get a cheap legal aid lawyer if you are indigent
> and accused of a crime. Legal aid doesn't represent defendants in
> civil matters.
But remember that 50% of the people in this country don't ahve a mortage. Of the other 50%- 75% have been in their home 10 years or more.
We are all in this together! What about the people who are doing everything they can to make ends meet because of a job loss or change due to circumstances they can't control. It makes no sense that some banks will not modify some laons for homeowners who are willing to stay and pay for the house they are in, but will turnaround and sell it for $100,000 less than the original borrower owed. Stupid!!!!!!!! I know because I have seen it happen in my neighborhood. Yes I am current on my house and it's value has dropped substantially. I have been fortunate enough to keep my family afloat by being responsible and blessed. But for all those who feel that they are so much smarter than those who are now in trouble, shame on you. What goes around comes around. God has a great way of humbling people. I have seen good, smart,responsible people fall on hard times. I don't know how we are going to get out of this mess, but it is a shame that we put everybody in the same box .
On Mar 31 11:15 AM imzem wrote:
> You pay your bills but can't afford to subsidize the next door neighbor
> who made bad decisions. He blew it, he loses the place to foreclosure.
> OK, but what about the guy two doors down who also pays his bills
> but needs to move due to losing his job? He can't sell due to the
> foreclosure next door, he can't make his mortgage anymore due to
> no job, he can't pay two mortgages in his new job location.
>
> Where are you now? With two foreclosures in your immediate neighborhood,
> what is happening to your own home value? What if you have to refinance
> or if you lose your job? Point is, we are all in this together whether
> we like it or not, and believe me I don't like it a bit myself.
>