Borrower to Lender: You're Not Foreclosing on Me Fast Enough

Don’t tell Sheila Bair, but some delinquent mortgage borrowers don’t want their loans modified. They just want out:

"I have even begged them for a foreclosure," delinquent mortgage-holder Charlotte Jensen said. When she realized she couldn't save her Glen Allen home last year, she filed for bankruptcy, packed up her family and moved out. Nearly a year later, Bank of America has yet to take back the home.

[snip]

Jensen visits her home weekly to ensure it hasn't been vandalized or taken over by squatters. She pays landscapers to keep the lawn mowed. When the home caught fire in January, the police department knocked on the door of her new home, confused about whether to notify her or the bank. When neighbors complained about the mess left from the fire, Jensen returned to clean up.

One thing to be said in favor of foreclosure versus loan modification: It gives the borrower a better chance at a fresh start. He’s freed at last of his monthly nut, and can pack up and move his family someplace where, say, the job market’s better or the cost of living is lower.

That’s not all bad. The foreclosure process is surely taking longer than normal this cycle compared to prior cycles, given the sheer scale of defaults occurring.

But regulators’ insistence that lenders try to modify delinquent loans prior to pursuing foreclosure is taking an already-extended process and delaying it even further, for the sake of benefits that are, from what I can see, largely imaginary. . . . .

Christopher Thornberg is still right. . . .

As they used to say during another big crisis a few years ago, it’s time to move on. . . .

Comments

[Roger Knights:]

Here's the Thornberg quotation:
“I fail to see how trying to keep people mired in debt as a way to help banks is good social policy.”

But helping the banks, and minimizing the foreclosure numbers, kicks the can down the road and buys time for the economy to turn around. And makes things less awkward, for the moment, for policy-makers.

Jun 25 03:59 AM

[D_Virginia:]

I'd love to foreclose and move on.

Even if prices stabilize today and start to increase 3%/year from now on, my home, bought in 2005 and having lost nearly 60% of its value, will still probably not sell for a break-even price until several years /after/ the mortgage is paid off in 2035.

There is no planet on which it makes financial sense to stay in that house.

I can live with ruined credit.

However, what I can't live with, is the six-figure deficiency judgment that would be granted to the bank against me if I foreclose because I'm current on my payments and still have a job.

So my choices are:

A) Have an underwater house (leaving me unable to ever move or refinance), good credit, and a six-figure debt.

B) Have no house, ruined credit, and STILL a six-figure debt.

Eff the banks. :-)

Jun 25 10:48 AM

[notsosmart:]

the middle class jerks are finally figuring out how dumb they are.yessir-you can afford it .just sign on the line & own stuff that you were never eligible for.but lots of folks made money off you. its ok now.you own banks,car cos & stadiums.

Jun 25 03:14 PM

[snagglesnarf:]

Why didn't Ms Bair just stay in the house and not pay the mortgage?
Doesn't she know we are all part of the something-for-nothing generation. Get a clue, lady.

Jun 25 07:31 PM

[paul:]

If you think this is bad, try and buy a house that is listed as a short sale. It is obvious that banks do not want to take the write down that will happen when the sale takes place. Makes one wonder how many houses are stuck in this limbo.

Jun 30 04:44 PM