FHA Walk Aways On The Rise
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you can really see who is “personally accountable” in the responses. scott, Make your payment and you wont have to modify
you guys are absolutely wrong on this one. First, it’s not the borrowers mindset that you need to miss payments before you modify, the banks made that a reality. They wouldn’t talk to you if you were current so you had to go late. Once they did start talking to you they wouldn’t let you pick back up paying while you were negotiating to try and preserve your credit, they would cancel any mod request if you paid again. Second, the obligation of a secured promissory note is that if you don’t pay the lender gets the collateral back. That’s exactly what’s happening. Banks, corporations, the MBA don’t feel a moral obligation to keep paying if it doesn’t make business sense. They walk away all the time. The idea of negotiating a better deal or walking away was invented by the corporations. Quit trying to guilt individuals into a higher standard under the guise of some stupid moral obligation. Bottom line: if its a good business decision for your family, walk away.
Good Point Scott. Individuals should not feel any guilt whatsoever. Yes, there is a Promissorry Note signed, but who Knows? Someone might have had a pay cut or have loss of income in their household. That individual might have made all their payments on time until this nightmare reaches them: Having to accept a pay cut. They complied with their Promissory Note. Then this borrower misses a payment or two. The bank starts calling and sending foreclosure threat letters. Rather than trying to modify the mortgage or reach a binding conclusion, the first thing the bank asks the client is whether they have anyone that can lend them some money or can they borrow from a 401K. Why not offer something that will benefit both parties? A loan modification benefits the borrower, but it also benefits the creditor. STOP PLACING THE BLAME ON THE BORROWERS ONLY. REMEMBER, BANKS WERE THE ONES WHO CREATED THIS MORTGAGE MESS BY JUST ABOUT LENDING TO ANYONE1
fha = government subsidized subprime. How about this? Don’t u/w 3.5% down payment loans and then we won’t have folks walk away within 2 yrs. In fact anyone who can save up 20% understands the value of money and will likely not ever walk away from an upside down obligation.
If banks and individuals deem < 20% to be too risky then why the heck are our tax dollars going to this black hole of doom, which has a blueprint for an unsuccessful outcome that is still unfolding.
I can't believe smart minds even debate this. Home ownership, like every other asset, is something to earn… not a fundamental entitlement.
Frank, you guys hit it on the nail.”The Notes have been COMPROMISED”. MERS, Recreating Notes, Faulty Assignment of Notes, or Un- Assigned Notes, Securitization of Loans and their sale to Investors, secret Quiet Title Action to REMOVE Clouds on Title created by MERS. Broken Chains of Title…Yes, you name it. These banks have done everything they can to SCREW the consumer, AND, NOBODY IS IN JAIL. So, why are we putting the blame on the consumer for walking away from their promise when Banks are foreclosing homes they can’t prove they own, even walking away, abandoning, bulldozing or donating foreclosed homes they can not sell. Then they 1099 the homeowner eventhough the loans were PAID IN FULL by Investors each time a loan bundle was sold. The BIGGER FRAUD here is these banks in their pursuit of Profits…tramping on our rights to realize these Profits. What’s good for one should be good for all. THEY GOT BAILED OUT and ALL we got was a Promise to be modified on condition that we DEFAULT on our loan. Yea, this is how they can get late payment collections on your loan while at the same time leave the door open for them to Foreclose on you often without proper notices.
It has become fashionable to default on a loan and you are right on when you say it is now acceptable. Arizona is one of those States that says if you walk on your obligation and it was purchase money, you can’t be held responsible for the deficiency. That may be the answer, when there are consequences to defaulting people will think twice about walking away. I could understand it a bit when values were falling and the loan products were bad ones. One an FHA Loan though, there need to be consequences. When is becomes painful to default, people will stop doing it.
This is a systemic problem much more far reaching than our real estate office. Making promises that are never delivered, no accountability, sound like any politicians you know? Broken promises, invent money to fix irresponsibility, national policy putting corporations over people.. welcome to the new American reality.
Brad – Amen on the MIP problem with FHA. I got a guy who is in a 30 and is willing to go to a 15 to keep the MI low, but because of higher payment, you can’t use the streamline approach. So, a standard FHA refi right? No, because his home was converted to a rental and that means he must go streamline w/o appraisal, but then he has to switch back to 30 yr and the MIP will take away most of his savings.
Do you think that the new refinance starting March 1st, will slow down the banks approving short sales?
lololololololololololololololo
Home owners beware…it isn’t a “get out of jail free” card, when you walk away from a home mortgage. Your bank loan is considered by the IRS to be income, and the difference between what you owe the bank, and what they eventually get when they sell the foreclosed home is taxable by the IRS. They can and will go after you. Also, check to see if you are in a deficiency or non-deficiency state. It also depends if you were using the home as your primary residence or as a rental. Check the laws on these matters…it could affect your decision immensely!
So, personal responsibility is a good thing?!? If I invest in something and it looses, should I loose money? Yep! If I’m a bank? Not so much, I’m too big to fail. $700,000,000,000 would have covered a lot of home loans.
Wells Fargo is not concerned because FHA covers their most of their losses. Duh
The feds take care of their campaign contributors.
You are exactly right- that is why I signed the petition at http://www.movetoamend.org
If indeed the foreclosures are from the last 2 years on the strict guidelines then why can’t we loosen guidelines back up some to the people that may actually be able to afford the home and make payments. I think this may be a positive thing for our industrty. Will it open investors eyes, loans are still going bad no matter how strict the rules are.
People get pissed off when they can’t refinance their current 5.0% to 5.25% rate loan and reduce their total payment! Why can’t they reduce the payment? Because FHA forces FHA streamlines into a higher annual MI rate of 1.15%. So they they consider bailing/short selling as an option.
Let the people FHA streamline refi and take advantage of the lower rate….that would be a start to help reducing some walk aways.
HELP IS ON THE WAY …. So the message read to the Americans at the Alamo!! …… and it did arrive.
Do you think all the kings horses and all the kings men can put Humpty Dumpty Mortgage Market back again??
When the “mortgage machine” was working everyone was making money.The foundation was that home prices would continue to rise. We have always had foreclosures but not this many. The politicians are in the business of garning votes and they can give away houses to get them.
Destroy the incentive to build, sell and buy a house and the industry becomes something entirely different. Why would a lender want to originate or own a mortgage with all the processing labor and potential lawsuits.Skip it and make some other kind of loan.
Hey guys take a look at Act for America (dont get caught) study and you will have your answere for these issues. From the President down when you have an influance that has no interest charged and three tenets to thier beliefs, join me, pay me tax or DIE. You will see the real issues we our facing in the free world. Do nothing and you parish. Or believe in me(The Lord jesus Christ) and I will heel you-trust in me!
Do nothing and you will parish. The sheep in th pasture may look like sheep, but do not be decieved look closer and idenify your deciever and deal with them manfully. Your lot may seem hard and your burden so heavy
The Canadians have it figured out. Their defaults are and have been so much lower due to many reasons but among them is that if a loan is foreclosed the borrower is still liable for a deficiency judgement. The Canadian buyer is on the hook for the loss. Sure you have to go collect it, but this would certainly eliminate the “strategic” foreclosure. If adopted here in the US, this would have the added benefit potentially of reducing interest rates as mortgages would be a more secure investment if mortgage holders knew they could pursue deficiency judgements.
just wait that bubble will burst soon.
Will Canada still take conscientious objectors?
I object to Dodd/Frank, HVCC/AMC, Obamanation and I don’t think Romney will change a thing that needs changing. I just may vote for (hold my nose) Obama cause that will cause the revolt needed and would be the fastest route to the changes needed.
Would you guys get off your silly “moral obligation” crap. Are you shills for the banks?? It is the banks that need to adjust their attitude, not the borrowers. And, this has not different than 20 years ago. The California legislature over 100 years ago decided that lenders should be discouraged from making risky loans. They passed legislation that in essense modifies mortgage notes to say, “I will either pay the amount of the note, or give you the house and owe you nothing.” The banks all know about this law and that laws routinely modify contracts. It is the banks that are conspiring to create a moral obligation where none exists. Further, they will lie on the telephone to hide the law from the consumer. They conspire together to make sure the homeowner gets no benefit. Why, for instance, will they accept a short sale price from a complete newcomer, but not from the borrower’s cousin? They wind up with the same amount of money. If the banks didn’t own Congress, this cartel like behavior would be illegal. I have a moral obligation to stick up for my rights, just as the banks stick it to the consumer in every legal way (and in illegal ways too knowing they are above the law through their ownership of Congress).
Ric:
Where in the world do you get your quotes from???
Guys, the MUSIC under your talk is VERY distracting. Thanks!
To Lisa and your question about “buy and bail”: I am sure you have something there. The original GSE plan was to prevent people from showing a lease on an underwater current residence, buying a new home and then walk away from the converted rental. Requiring that borrowers qualify for both homes(without benefit of a lease) helped reduce that, but sadly it thwarted the plans for responsible people who would have gladly kept the payments current on the rental and also the new home. Since the lack of equity in the old home meant rental income couldn’t be counted, many people were denied the opportunity to move up. That obviously became an impediment to moving homes. Moreover, those who could afford to qualify for both homes would still go ahead with the default on the prior residence if they saw the economies of doing so…hence the new term, Strategic Default.
I have a feeling that there is more to do with loss of jobs and income and lack of assetts in their checking and savings accounts then there is of lack of equity in their homes. If they bought in the last 2 years that means they only put 3.5% down or less with down payment assistance programs out there and they never really had any equity in the home at all. The reality of the situation is that once a homeowner falls behind on a mortgage payment and that homeowner has no reserves… there are very few options available to them.
Mike Scalise
815.621.9888
mike-scalise@comcast.net
That’s right! If the unemployment rate isn’t addressed in the “walk-away” mentality, then it just noise! Additionally, if the consumer is expected to have ‘personal’ responsibility on a two-party contract (note), then the other party (lender) needs to be held to the same level of responsibility. The lender’s sloppiness in their business model has created and fed this monster!
Does anyone’s word mean anything anymore? You hit the nail on the head! Previous generations would never have done as people have in the last 10 years. Pride and self-respect would have prevented them from just throwing up their hands and walking away. How can we rebuild without a solid foundation? Without accountability, there is no foundation.
1st post didn’t get posted because I mentioned RP as the only candidate that would help… I think FHA walks are due to inflation making EVERYTHING cost more @ 15-20% in the last few years. Not the ridiculous Gov figures… FHA has taxes insurance everything lumped in and as gas gets near $4 a gallon people don’t have the money or the budget skill to make that huge PITI payment. Think food, gas, healthcare, insurance, Prop taxes all are up… (or at least not down as much as they should be (prop taxes)). This silent stealth tax of inflation in the face of lower real wages is just getting worse. Yet the F-E-D prints… Go R.P.!
I think it started in the school system in the 70′s, I remember my niece came home and told my brother that the teacher told her it wasn’t her fault she got a bad grade. The schools no longer teach civic or personal responsibility. You see it TV ads, …”can’t loose wieght, it’s not your fault…”. This problem will continue until personal pride is reinstalled in the individual and not washed away in the “political correctness” idealolgy that erodes self determination and responsibility.
Amen! “Here’s your huge trophy for coming in 7th place”… (check out Adam Corolla’s take (aka rant) on the occupy movement — google it, it’s worth it!
I too think the schools are to blame. For a long time I have suggested that there be classes in all public schools that teach what a mortgage is, the types of mortgages, what happens if you don’t make your payment, what your true obligation is, how to balance a checkbook, what credit cards are, how to balance a budget etc., etc., etc. How about kids getting out of high school with a game plan on life???
The problem with your commentary is that banks are unwilling to work with clients that actually want to make their payments. If a client that has a balloon payment due and is unable to refinance a land loan due to really low ltd requirements, is basically screwed because of the depreciation of said land. The client is willing to recast or actually willing to make payments for a long period of time, is unable to because the servicer indicates the client is not eligible for a reset or recast. The services are blind and unwilling to help those who actually want to continue to pay on their loans
Promoting cruises at this time is in very poor taste. WTF are you thinking?
very tacky
I would have to agree with this. Awkward…but I love you guys.
Eh, have a sense of humor!
Do you think that FHA,VA,Wall Street,Government gives a crap about the lower to middle classs struggling to make their mortgage? NO. What about the over inflated price of gas, consumer goods, college costs, inflated electric bills, etc… Greed put us in this position Big banks, Big Government, Big Wall Street by allowing people to buy above their means to this day. People are now smart enough to play the GAME! Credit cards cutting limits over night for BS reasons, creditors charging interest rates that should be regulated. Why keep paying on a 19%-30% credit card when all you are doing is going broke and paying nothing down? Then these people try and refinance and pay off debt only to be right back in the debt because the job market is a joke our economy is a joke! Our government is the biggest joke. I say “WALK AWAY WHEN YOU CAN AND NEVER LOOK BACK IF THAT IS WHAT SAVES YOUR FAMILY FROM A LIFE OF DEBT AND INTEREST RATES AND MORTGAGE INS. PREMIUMS THAT ARE SO HIGH THEY SHOULD BE A CRIME! FHA MIP 1.10% and 1.15% while rates are this low..Seems like they knew these rates would be this low and looked to profit!!!
Brian and Frank’s point is valid, personal commitment has been deminished. Their point is not that all walk aways are solely the result of choice without valid circumstance. They correctly point out that personal commitment has been erroded by the constant demonization of an industry. Further to their point, when something becomes common it becomes ok, when it becomes ok, it becomes the rule not the exception. One need only look at the state of marital bond in our country…before divorce became ok it was socially frowned upon ensuring it (divorce) was the exception. Personal committment and righteous behavior have become the exception. On a lighter note spring is around the corner and hope is ever present.
I’m sorry, but i would have about 10,000 questions before i would buy those numbers.
Is the number up because old foreclosure that normally would be off the books are lingering due to all the reasons we all know about?
What is the true default % for just the last 2-3 years?
With increased MI premiums, is Wells not conceren because the amount of actual default in the last 24-36 months compared to the increased volume still mean they turning huge profits?
Why would you say that people are defaulting on loans just because they can, even when (as you both stated) that the rent equivalent will cost them more money. Are we suppose to believe people are defaulting just for fun and are willing to except a lower standard of living.
I can go on and on…just stating the deault rate is up makes no sense to me. And even if it were true, what is thier real exposure and expected exposure. Is that number in line with what they expected?
Great Wake up and Reality video today.
This is the 2nd shoe waiting to drop that has been expected the last couple of years.
Brian, if that is a new tattoo, you were either really drunk or bumped your head!
ha! actually neither.
I can tell you for a fact that there are people walking away who can clearly make their payments. Being a real estate broker I see it all the time. I love the conscious soothing comment “of no fault of their own” This is not only happening to housing, but to large tracts of land and commercial. I have always said this wave was coming and I agree with Frank and Brian on this one. We have created a society that feels entitle, that if things go wrong there is no effort to do the right thing.
Wells Fargo promote they will do FHA loan with sub-600 FICO scores. This may be the reason their FHA foreclosure rate is going up.
I have turned down two loans where the borrowers qualified for both their old home (that was incredibly upside down) and the newer, larger and better home (that is incredibly under priced). Someone else originated the loans and these people bailed on their old obligation. In both cases, they did it because “all my friends are doing it”. We, as professionals, need to hold our peers accountable and call out the LOs that are only in it for the money and let this practice continue.
How do these delinquecy rates compare historically, taking away the time period from 2005 – 2008?
I don’t have the figures in front of me but I think it has doubled.
Howard:
Here is the website
http://www.mortgagebankers.org/NewsandMedia/PressCenter/66626.htm
I am a Certified Housing Counselor for a HUD approved non-profit agency. I am seeing some of those new FHA loans. The clients I am seeing are due to unemployment. Of course of those the only resolution while they are receiving unemployment is a forbearance. Wells Fargo is my worst nightmare when it comes to requesting assistance. I contacted the Presidents office for escalation help and was told the department (Loss Mitigation) is overwhelmed. It has been a week and I still have not heard from anyone. I find it extremely rare to have a client approved for the MHA program and FHA’s requirements for modification assistance are tough. Sure the mortgage meltdown has made it easy for people, but I will say the our clients do not want to walkaway, but the modification process is so long and frustrating that some give up and walk away.
With a healthy share of the FHA market, Wells Fargo needs to increase staffing in their forebearance department in order to facilitate homeowners seeking to exercise the forebearance paragraph in their deed of trust. At closing, I always advise my buyers to call their lenders first if there is an inkling of financial difficulty and distress over making their mortgage payment when disclosing the forebearance paragraph in the deed of trust. If the lender/servicers are not properly staffed for these unemployed calls, how is a borrower to attempt to exercise this option in their deed of trust? Shameful that servicers are not returning calls. I, too, see very few permanently successful loan modifications and feel forebearance is the only viable option. If the student loan companies can handle forebearance requests, why are the servicers having such problems with follow up?
Good idea…but all such communications should be in writing and delivered via Certified Mail.
Anybody else experiencing rampant “buy and bails”?
I guess I should clarify…..people that are NOT behind on mortgage, that ARE able to qualify for 2 loans are buying new homes and then bailing on current home to “reset” their mortgage. FYI-no lies on statement letters to original lender, no “fake” rental agreements.
Attitude starts at the top.
Which right now is the feds and the banks. Neither give a crap about the average person. So the average person has in turn stopped giving a crap about them.
The bills that are being presented and passed are clear indicators of who the politicos represent and that is the banks.
Nice try but now way
The blame of all this mess should not be put with the consumer. The Banks created this mess and I do not have to tell you why nor how. You should figure that out on your own. When the banks change their ways so will the consumer. That is the way it has been and always will be. You guys look now as you were working for the banks, disseminating wrong information so they can manipulate the market as they wish. Please get yourselves better informed so you can inform us correctly. Thanks and good luck
I dont agree!
I don’t believe the issue is from new home buyers but from refi’s.
This issue was discussed several years ago when we started doing loan modifications for people who should not have been in the home to begin with.
We discussed as an industry how this problem was going to come back and bite us.
Frank/Dodd sucks!
Completely agree with you, Chris!
I totally agree. It makes me sick that our collective word means nothing. The last Three years of run away spending by the government (Dems and Republican “like there is a difference”) and the acceptance of walking away even if you can afford to pay is disgusting. When you buy a car and drive it off the lot It drops 25% of value. So should you stop paying on your car payment? why do we even bother to have people sign anything?
I think we would need to get more specific on the actual origination date of these loans that are defaulting. Walk Aways are mostly a result of negative equity or employment issues. I think if people aren’t upsider down and they do have a job, they ain’t the ones walking.
Nick: Why should “upside down” be considered a legitimate reason for walking away? Just about everyone is “upside down” on their student loans and consumer debt. None of those obligations were conditional on “everythig goes as planned”.