You Thinking What I'm Thinking?

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Location: Vancouver, WA, United States

There are some things going on in this world that bother me ... that offend me ... that don't make sense, and never will. I dedicate this site to those who seek truth even where it is difficult to find, and who are willing to agree and disagree in principle, while steadfastly refusing to let irrelevant detail overshadow core truth.

Tuesday, August 4, 2009

If I Hear One More Foreclosure Story ...

Certainly my wife and I are not the only ones who have experienced this, and perhaps it’s “old news”, but I think it is important for everyone to hear. It exemplifies the fact that, in this country we are losing the battle for individual rights in favor of the rights of large businesses, banks and automakers, as exemplified in the way the legal system is structured. Why? Money and the power that it affords people/lobbyists willing to spend it to achieve their specific ends.

Here is our story:

My wife and I are 64 and have strived to keep our credit pristine. Our credit score was always well above 800. We never defaulted on any payment to any creditor in the more than 22 years of marriage, even during a rough period when I was out-of-work for more than 20 months during a time when Austin was experiencing severe unemployment. Somehow, we always made our payments on time, at the cost of our life savings … of our future.

The one effect of the employment and financial crunch was that in two moves, we watched the accumulated equity in our home disappear, leaving us in 2003 in Northern California renting and watching the average home value increase about $100,000 per year.

All advisors told us that we must buy a home, and our very strong credit rating came to our rescue – or so we thought. We found one moderately priced for the area, the right size and in a nice neighborhood, so we purchased it with 100% financing, 80% to primary lender and a 20% 2nd Trust Deed, with a three-year balloon payment. Again, our advisors believed we could refinance in 3 years to resolve the 2nd. For the first year we were gratified to see our home value increase more than 10% - and were encouraged to refinance the 2nd TD by our broker. Big mistake!

Here's the rub ...

It seems there is a clause when one refinances a 2nd TD – that expands the the borrower's committed collateral beyond the equity in the house to all of their personal property. NO ONE explains that – the broker doesn’t, because people would think twice; the title rep doesn't mention it a time of signing – because people would again balk. They hand you a piece of paper and say, this means xyz – and you sign it. Who reads these documents? Most attorneys would have a hard time grasping the breadth and depth, let alone the lay person.

Then, the unthinkable happened. My employer had to make some changes – cut backs in my department were at the top of their list. I was given six months to find another position – far better than being laid-off – and we did, 400 miles away, in Southern California. We then went to the real-estate market to put our home up for sale and were shocked to find that fear of the pending housing crunch had already eroded the potential sales price of our home to a point well below our purchase price; below what we owed on it.

We went to both the first and second TD holders to talk about options and receive the most bizarre message from each: “We cannot talk to you about this because you are not in default on your payments.” What?!!! Default? Not an option. … or so we thought. In July, I moved to SoCal and my wife stayed behind to assure the house was in tip-top shape while we put it up for sale, or lease. At first, people came to see it and everyone commented that it was the jewel of the neighborhood. Jewel or not, housing prices were plummeting and we received no offers – even for a short sale. For nearly six months we watched prices fall, trying to stay at or ahead of the movement to encourage a buyer to step up.

In the end, the pressure of making payments on our house and a place to live in SoCal took its toll. I consulted an attorney who advised that we should default and force them to the table to talk about the problem. Knowing that it would impact our credit rating, we stopped making payments on the 1st and 2nd, but continued to pay homeowners association and utilities so the house would not fall into a state that people would refuse to view it. This was at a time when others, even in our neighborhood, were defaulting and pillaging their houses for fixtures and appliances, and more.

Within 45 days, we were in discussion with both lenders. Neither was willing to consider a reduction in their interest rate or any reconstituting of the loans. The 1st TD lender said we could tack what we owed onto the loan for a few months, thereby increasing our indebtedness – but not further concessions were offered. This was about the time that the media picked up on the “housing crunch” – and the rate of foreclosures was skyrocketing. We were about to become a statistic.

We were four months into default and our credit rating had dropped 100 points or so when an individual at CitiMortgage (Alan) finally came up with a remarkable proposal: make an offer to pay 10% and Citi will write off the balance. I confirmed it with another, who asked me to submit reams of paperwork in the form of a workout package – but it was worth it … or so I thought. At the same time, the first TD lender offered a lower interest rate and a clear bill-of-health on our credit rating.

We filed on both opportunities in May and began a two-month long process of trying to get any response from either, especially the 2nd TD holder, CitiMortgage. We were dealing with “the right people” or so we were told, but also that they were bogged down with thousands of similar cases. I quickly memorized the phone numbers and email addresses of the few people I was allowed to speak to at Citi. Any attempt to go higher was thwarted.

In the meantime, the 1st TD lender started talking foreclosure; I felt increasing pressure to get it done. If, in fact, we were able to buy down the 2nd TD as Citi implied and get a lower interest rate from Greenpoint, we would keep the house and lease it out – with only a few hundred per month of negative cash flow. That was acceptable, it was preferable. Citi came back and asked us to make one month payment to give them more time to process – and like hopeful idiots, we agreed.

At six months after default, we were sent a notice of foreclosure. I tried against all hope to get Citi to expedite – actually, expedite is the wrong word, as they had already passed the time frame originally committed for a resolution.

We feel that Citi forced us into foreclosure through their incompetence and their questionable business practices. They never should have written the loan. They should have talked to us BEFORE we had to default. They should have followed through with what was originally their suggestion, and chose not to do so. Had they done so, they could have recovered a large part of the amount we owed, as the market had not fully eroded at that point. In July, Greenpoint foreclosed and still we never heard from CitiMortgage. Our credit score dropped another 100 points. We will never be in position to buy another house; the dream has been dashed on the rocks. The saga continues …

Now, in spite of all that our attorney believed, against all reason and AFTER Citi received billions in government subsidies (my taxes helped fund these) – they have chosen to take us to court. We have nothing, no savings and no assets, and my attorney is incredulous. They should not be doing this! But they are.

Here is where the law has abandoned the individual: I cannot include as part of my defense any word of the offer made and acted upon to settle for 10% - it is inadmissible! Moreover, I have absolutely no recourse for their incompetence – for the destruction of my credit rating and my inability to buy a home or build any kind of equity. Their part in this is inadmissible. Inadmissable? It’s the core of our position:

  • They induced us to take this loan (away from the original 2nd TD) and DID NOT make it a point to tell us how this was different; how we were personally responsible for the full amount.
  • They refused to talk with us or any attempt to resolve the problem BEFORE we went into default.
  • They stalled and thwarted any and all attempts to resolve the issue, forcing us into foreclosure.
  • They took $Billions from the federal government and still expect to squeeze additional money from us, their customers and the taxpayers who bailed them out.
  • The “law” doesn’t allow us to mention the reason we had to go into default. The law won’t allow us to admit the evidence of their culpability.
  • The law protects them, and gives them money in the form of bailouts with our tax money AND empowering them to pursue legal action.
  • The law has been written by people who are funded largely by contributions from these institutions; people who somehow have forgotten that they, too are people.

I don’t get it. What I do get is that the “American Dream” has subtly shifted from the individual to that of big business. “…for the people and by the people…” has given way to “for profit, by any means”. And if they get into trouble? We’ll bail them out. After all, it was important to do so, lest we be driven right through this recession into a depression the likes of which we have never seen. I wonder.

This story and so many like it needs to be heard; people need to be forewarned. We need to get back to our roots where government is about protecting the rights of the individual, not just those who pay the most; and where the objective of the law is to provide justice, not to fuel profits.

I’ll never buy another house. Unfortunately, I don’t think I’ll ever see this resolved. We are hurtling toward our destiny – a crash that will cost us all dearly. Orwell may have been right all along, albeit a bit premature. I am worried about us, about a condition creeping into our society that forces us to become like them – greedy, dissatisfied and unrepentant.