This is the second of what now appear to be three columns about how we as a people allow ourselves to be victimized, whether by unscrupulous computer hackers or unscrupulous computer bankers. This part is about the bankers — the guys whose bonuses were too big to be discontinued. Part three will present a possible solution to this specific systems problem…
A year ago I wrote a sad little column about my friend Ralph and his difficulty getting his mortgage adjusted. Ralph had lost his tech job, there was this federal program to help people in his position lower their mortgage payments, but for some reason it just wasn’t working. His lender kept losing the paperwork, forcing Ralph to reapply three times. Twelve months later Ralph is now working hard at a tech startup that can’t yet afford to pay him, he’s thankful his wife has a good business reselling children’s clothes, but their mortgage still hasn’t been modified, though Ralph keeps trying.
Here are the numbers so far, according to Ralph:
He has dealt with 11 different bank negotiators
He has applied for either 8 or 10 modifications (depends who you ask)
He has made 50 phone calls
He has sent 35 FedEx shipments
He has faxed the bank 300 pages
He scanned 70 pages to PDF and sent by e-mail
He initiated one Congressional inquiry
Understand here that Ralph isn’t an outlier. He is not in foreclosure. He’s precisely in the intended sweet spot for this federal loan modification program — just the sort of customer who ought to easily qualify — and has qualified several times only to have the deal fall apart every time.
Recently Ralph’s modification request was again denied. “I was told my modification was closed,” Ralph explained, “because they were waiting on information from me per the FedEx letter I have attached dated July 21, 2011. Nowhere does the letter ask for more information. It asked me to call Tawanna Banks but lists the wrong number for her. The letter was not even written on bank letterhead! I found the correct number 877-430-1431, extension 276004, called and left a few messages. She never called back. I kept calling and eventually talked to a new person who verified my information over the phone. It took a long time, but everything was supposedly fine. Then they dropped me anyway.”
The loan servicer in this instance is Bank of America. In my previous column on this I blamed the problem on IT glitches, possibly at Freddie Mac, which guaranteed the loan. A year later my view of the situation is different: I’d say Ralph is getting the runaround from BofA, which appears to have no real interest in helping him.
Is an organizations that asks for extensive paperwork then loses it as many as eight times simply incompetent or are they evil? My money is on evil.
In the bank’s communication with Ralph they make the point over and over that “assistance isn’t guaranteed.” Looking at the numbers above it might be more accurate to say “assistance is unlikely.” It is very hard to see this as negotiating in good faith.
Maybe the bank is just pretending — faking it in hopes that Ralph will eventually get the implied message and go away. They don’t know Ralph.
Just lately Bank of America has been having a hard time of its own. The bank’s stock is down and it has even been rumored to be at risk of going under. Then last week Warren Buffett came through with $5 billion in new capital from Berkshire Hathaway to shore-up BofA. Too bad for Ralph, who would certainly be better off if the bank goes under, allowing some other organization to take over servicing his loan.
There are many lessons to be learned here, but what are they? Don’t lose your job? Don’t believe your government or your bank? Resistance is futile?
Then it came to me in a pair of blinding realizations. First, Ralph is insane. Second, we have all been looking at this mortgage finance problem absolutely backward.
There’s a quote I’ve seen attributed to Sigmund Freud, Mark Twain, and Benjamin Franklin that “the definition of insanity is doing the same thing over and over again expecting a different result.” No matter who said it first (apparently it actually surfaced in a book from the group Alcoholics Anonymous) this clearly applies to Ralph. The poor guy just keeps doing as he has been told and what happens? He gets screwed over and over again.
So Ralph is crazy, but more than that we are all crazy, because here we sit rooting for him to get the damned mortgage modification when it is obvious BofA isn’t going to let it happen.
But why won’t they?
That’s when we come to the other side of this mortgage mess. Instead of concentrating on who is being hurt by it, let’s look at who is profiting. And a lot of people are profiting. Financial bubbles eventually pop, that’s the rule. But this historic housing bubble from 2001-2007 we’re still recovering from hasn’t popped for everyone, at least not yet.
The first thing to notice is that most homeowners aren’t in Ralph’s position. For all the mortgage distress out there only about 14 percent of U.S. homeowners are behind in their payments or in foreclosure. While this is a huge number (something in the range of nine million mortgages) it still leaves 86 percent of U.S. mortgages intact and being repaid. With interest rates at historic lows you’d guess that most of that 86 percent have recently refinanced to take advantage of lower payments. No, they haven’t.
A quarter of those homeowners in good standing have no equity left in their homes at all and the rest have significantly less than they once did — often not enough to qualify for a new mortgage. So they just keep paying on the old one, which is at a significantly higher interest rate. That’s why we saw a refinance flurry in 2008 that has since, for the most part, vanished.
Rates are down, sure, but qualifying rules are stricter and there are at least 30 million U.S. homeowners who are literally trapped in their old mortgages. A few walk away, but most don’t because they worry about ruining their credit. And this means that while new 30 year mortgage rates are in the 3-4 percent range, the average rate paid by these trapped homeowners on their old mortgages is twice that. And since their loan initiation overhead was amortized years ago, their actual yield is even higher.
Are you making seven percent on your money?
What we have here is an astounding corruption of the mortgage market. This game is rigged, yet everyone in government from President Obama down pretends that it isn’t. And don’t blame just Obama: the Republicans might be even worse.
Over the last 30 years the average American home was refinanced every three to four years. That was the life expectancy of your 30-year loan in the mind of the guy at the bank who approved it, when, six years ago? But these underwater and zero-equity ghost mortgages have become essentially perpetual, since they can’t be refinanced and nobody will buy the houses.
This is all you need to know to understand the stalled U.S. housing market: it is stalled because a class of investors has found a way for their investments to not only live on after the housing bubble popped, they are actually making more — in some cases a lot more — than they were on that money when the loans were originated. They are doing so well, in fact, that they can’t imagine a circumstance under which they would ever allow the ghost mortgages to go away, no matter the cost to the economy or the nation.
So the ghost loans aren’t going away. And the longer this unnatural situation lasts the more all the rest of us are being hurt.
Understand that we are talking about at least $2 trillion in ghost loans that really ought to have been refinanced but weren’t because of these structural issues and because the banks — who clearly know what’s happening — don’t have the guts to stand against their investors. But that’s nothing new. And it’s not going to change until someone at the very top does something about it.
Next, what can be done to fix this mess at no financial cost to the nation…
“And it’s not going to change until someone at the very top does something about it.”
They will do no such thing. Why would they? They’re the ones profiting from this system. And had been for decades…
A 7% interest rate 30 year loan? Why over the 30 years, you are paying more in combined interest than the principal was worth. Nobody who took out such a loan was really intending to pay the loan – they were all speculating the property value would go up by more than 7% per year and somewhere down the road they would sell it, pay the mortgage & make a profit. This worked for quite a long time, but not any more.
We the small people get carried away and forget one simple rule: The house always wins! As in a casino, you can think you are very clever and have a bulletproof system, but the house (in this case: gov, financial institutions, big investors, etc.) always wins. They, after all, make the rules and pull all the strings. They will change the rules as needed to ensure they ALWAYS win.
When their game works, they pocket the profits, when it doesn’t, it’s a crisis and we (the taxpayers) must pay their losses. Plus the people on top get their fat salaries & bonuses regardless. A triple win for the big guys…
Yeah, everyone’s complaining now. Before the meltdown though, every suburban dinner party was dominated by smug conversation about rocketing house prices. People built extensions, converted their lofts, bought fat cars, boats, holiday apartments in Spain (uh oh!) on the advice of the banks advertising “unlock the capital in your home”. Actually, barring a couple of blips in the 80’s and 90’s wild house price inflation had been going on for decades and everyone had been banking on it.
Five minutes’ consideration would have shown that, within our children’s lifetimes, it was going to be cheaper to buy a Boeing 747 to live in than a three-bedroom semi the suburbs of London.
Maybe at last we’re getting real. The banks are greedy, perfidious bastards for sure but they were also a bit like pork farmers shovelling grub to herds of pigs at the trough. A big part of me thinks we’ve only ourselves to blame.
Historical housing price for a standard home is $100k (inflation adjusted, etc.) from somewhere in the 1800’s to 1980, at which point the price started to spike until it peaked just after the turn of the century and is now falling again back towards that $100k price point – it’s just still got a long ways to go.
Housing is never a place to make money (unless you’re the builder). But it is normally a good place to store money such as to safe guard against inflation.
Well, for what it’s worth, I think municipalities and local taxing bodies may also be benefitting from overpriced housing. If you compare your home’s assessed valuation from your county tax assessor to that home’s value on zillow.com, odds are that Zillow will be much lower. Which is more accurate? Counties, cities, villages, and schools depend on property taxes in many areas of the country and inflated housing figures may help them pay their bills. But what happens when the bubble does pop? Will it ever? I don’t know what’s worse, having an unrealistic hyper assessment or watching as our municipal and educational infrastructure crumbles.
Banks were given a very important privilege to create money in the form of extending credit. This function requires diligence and careful consideration in regard to individual credit risks as well as to overall credit levels in the system. The financial crisis revealed that the banks were operating at too high a leverage and with too much risk. They were used to be saved by the Central Banks and certain that in times of difficulties the Central Banks were there to save them. They were like trained dogs and their master Greenspan or Bernanke would always be there to rescue them when unforeseen difficulties arose.
That may be true but that does not absolve them from their obligation to monitor overall debt levels in the system as well as being diligent in evaluating the debtors ability to not only service a debt but to be able to repay it over time. The banks clearly failed in this function that is the core function of banking but focused mainly on their compensation packages. The way these bankers enriched themselves in the process of driving the financial system into a wall was appalling and the average income earner was never able to comprehend their schemes but preferred to simply ignore them. Of course, the bankers explained their outrages income levels with free market principles of supply and demand, where the best simply could be hired with those kinds of benefits only. In hindsight those superior managers seem to have missed their mark considerably. The most interesting aspect of all of this is the fact that, after we have been more than 3 years in this financial crisis, the bankers continue to loot the system as if nothing ever happened.
True to form the Central Banks “saved” the financial system by saving those great financial institutions without whom the system would have collapsed, as was argued. Hardly were we out of the danger of collapse, the banks immediately went back to their old ways and were certain that this was a problem that would occur just once in a lifetime and now all was clear again. The real problem, however, had not been addressed but had simply been muddied.
In actuality, the losses produced of extending unsustainable levels of credit by the banks have been transferred to the public. Different ways were chosen to achieve this task in the form of free money for the banks, injection of government funds into some institutions, increase of basic money supply and so on.
The threat of system collapse would have been labelled blackmail if it would have occurred in another setting. However the bankers were able to influence the media, the legislators and regulators in their favour with all the financial resources available to them. Nobody was made to take any responsibility and no one was taken to account.
This represents a serious violation of the spirit of the Rule of Law that is the basis of western society. It seems that now the new rule is Might is Right. This changes many parameters in the compass of the social system within the western world. No one can be sure on what level and when one will be subjected to the financial abuse of those elites. Presently, the people in charge are trying to enhance financial repression of which one form is to keep interest rates below the level of inflation which affects mainly those that lived within their means over the past many years; another clear violation of the spirit of the Rule of Law as it transfers losses from bad investments to the innocent and decent part of the population. In addition, the increased level of government debt puts in doubt all those benefits promised by governments the world over.
It is interesting how the banks were able to confuse the public who was/is unable to grasp the actual situation. But considering the banker’s great financial resources, it seems not that much of a miracle to influence the media and the legislator and having politicians do their bidding. Until those bankers are not made accountable on a personal level, the spirit of the rule of law remains suspended.
Part of the problem too may be that the Banks took to the idea of writing off portions of the debt as uncollectable instead of doing what they can to help people collect it.
That is, they purposefully took into account the idea that for every $1 they loaned out (no, I’m not counting in ROI – e.g. interest), they would only actually be able to collect $0.70 of it (or whatever number it might have been). This is good from a risk assessment view but should have been “worst case” not “this is what we plan on”. The “plan” should have been to help recover the whole $1 loaned out; which would mean (i) working with people to help them pay it back (by changing the loans, etc.) – namely for people that should have gotten loans but ran into troubles (e.g. job loss) and needed to work out of it, and (ii) ensuring that only people that had a good chance of paying it back would actually get a loan to start with.
Too often, the banks have simply said “we’ll foreclose” even without trying to work out a way for people to pay it back – by adjusting the payment schedule, etc. Many probably could have if they simply worked with them; others should never have gotten it in the first place and should have been properly foreclosed on as a result – though even then, perhaps adjusting the schedule could have saved them if only the banks tried.
Who’s the we?
I never took a mortgage because I knew the market would crash, I couldn’t afford it without putting myself into too much debt that could become a problem if interest rates went up or a I lost my job etc and ultimately the prices where inflated.
I also never took a pension because I didn’t like the idea of someone “investing” my money with no control from me plus I see the pension system as a con by the political elite to give money from the normal people to the financial elite where they can gamble it quite happily without consequences to them. I remembered as a kid the pension scandals of Maxwell and others and I’m fully aware that ultimately the pension system will never be able to pay out to me (due to longer lifespans and falling birthrates) the amount I will pay into it. So why should I bother?
One of the reasons nothing will be done is it just seems that a lot of people, mostly those in their 50s to 60s don’t really have much of an issue with the current system as they’ll probably be OK but they are really screwing the younger generations.
The other main reason nothing will be done is because most of Obama’s advisors are Goldman Sachs men. Unfortunately another politician disappoints and shows himself for what he is, a puppet of the financial elite.
… Since the house always wins, don’t play the game. Instead of the 30-year mortgage game, here’s a RADICAL idea: live well below your means in the cheapest apartment you can stomach, save as much as possible, and … after much patience … do what I like to call the “100% down payment” on your house.
And guess what? Home-sellers (banks) love cash. With that type of cash, you’re certain to get a discount.
Hey, I said it was radical … no, not easy, not quick enough for our microwave culture, but yes, absolutely possible.
Actually, they don’t. Everyone involved makes more money from a home loan than an outright sale. If it’s a small home being sold privately, they’ll love you. The moment the banks are involved, they won’t give a hoot about your money. They want that mortgage, because, to borrow a phrase from The Sopranos, everyone wets their beak in a mortgage.
Thanks for adding some common sense. It’s not too radical to realize that anything is more expensive if you pay interest as well. Back in the 50s, we were taught to “save up” for anything you could not afford. But don’t count on a discount. I bought my house for cash 30 years ago but the only discount was the interest I saved. And now that I look back, improvements, repairs, maintenance, utility bills, and taxes have made me think I might have been better off renting.
Henry David Thoreau lived in a shack that he paid 100% down on to avoid living the “life of quiet desperation” as he called it.
Nowadays such a shack would be illegal for building code violations, but even back then it was illegal because he was a squatter. I guess he avoided legal problems because he was a prominent “thinker”.
You could be like Dick Proenneke and basically drop out of society and build a shack in Alaska’s wilderness, another interesting ’60s experiment if you’re a hermit that is.
Interesting ideas, but wholly impractical.
You are talking of the two years that Thoreau lived at Waldon Pond. You are mistaken to think that Thoreau was squatting. He was living there with the permission of his friend, the actual owner of the property. That friend was a famous poet. Ralph Waldo Emerson. Thoreau also paid for the privilege. So, he wasn’t a squatter, he was a tenant.
Hallelujah, brother. Amen!
This was the trap Japan fell into. Most homes were worth less than the mortgages owing on them, but people kept paying their mortgages. This was a huge drag on consumer spending and one of the main causes of “the lost generation”.
This is exactly what my wife and I did. We both owned our first home, mortgage- free by the time we were in our late thirties. Ever since then we have moved to a bigger house, never taking a loan, but financing it using our own savings. Once you get used to living mortgage free, you can never go back.
zillow.com ?
Huh?
Property valuation is determined by a licensed real estate appraiser, not the internet. Property appraisal automatically takes place when you buy a house. Of course you can have one done anytime you wish. If the assessed value of the property doesn’t match your tax assessment you can file a challenge with the pertinent tax assessor to have your assessment changed. He may pay for a new appraisal by a different certified appraiser and then compare the result. If the new appraisals agree, he’ll probably adjust the value. If you still aren’t happy you can bring your complaint to court but a favorable ruling will probably go the side with the better appraiser.
Of course depending on how astute your tax assessor is your mileage may vary. Skill and ability differ among appraisers too. Keep in mind that your assessor is an elected official and is subject to oversight by various state regulatory agencies including your state’s attorney general.
Many tax assessors use computerized mass appraisal tools and are able to reassess an entire county to stay in line with current economic factors so it is doubtful that property values on properties that haven’t changed much will be far from the mark. If there is a problem chances are its on properties that have recently changed in some way or newly constructed and the building permit hasn’t made it to the assessor’s property inspection department to update the assessment.
Not satisfied with your tax assessor? Next election elect a new one. Run for office yourself.
A house is worth what someone will pay for it.
Oh, grow up!
No no, he’s right. Purchase price is definitely a factor in property assessment. However the circumstances of a particular sale are taken into account. If a property sells at a low price because parents sell it to a sibling, the property will still be valued at market value, not the “bargan” value. Similarly if the property is sold under “distress” – the owner has to sell quickly because of financial difficulties, etc, the value stays at market value.
Yes, purchase prices of property are a daily topic of conversation at your local assessor’s office.
Charlie is right, what the market will bear is the “only” valuation of a house. Go to Detroit you’ll find lots of worthless property, because nobody will pay a dime for that junk.
Everything else we buy tends to depreciate the moment we buy it, why not our house? Actually the house does too. But you are generally buying two things with your single purchase: the house structure itself, which is always depreciating like any other manufactured object; and the actual “real estate” which is the yard it is sitting on (only because it is generally impractical to separate the two things, to remove the house from the land).
So if a neighborhood is slammed by recession and nobody’s making enough money to buy property, then the market stagnates and asking prices eventually have to fall to meet what the market will bear. Or other phenomenon such as deteriorating neighborhood.
Common wisdom says to buy the worst house in the best neighborhood, now you know why!
My dad pointed out one time that the stock market is quite a bit the same, but nobody buys stocks (that don’t pay dividends) for any reason except that they expect it to rise in value. So one guy is selling because he thinks the price is falling and one guy is buying because he thinks the price is rising, and at least one of them is wrong. 🙂
Two things. We lived in Oklahoma through the 1980’s where the common joke was about the FDIC being the largest bank in Oklahoma. I lost count of how many times I changed banks only because the previous one had failed.
The second thing is we opened our BofA account August 1998 when we moved away from Oklahoma. I was looking for a national bank with a lot of ATMs. For a long time, until about 2005, they were a pretty good bank. Then the bottom dropped out. We moved to a city where there are only 2 locations with 1 being downtown and the hours are horrible. They close at 4P most days and trying to do anything is difficult.
Then there are the ATMs, or the lack of them. There is the one location we can get to, there is one in a major shopping area and another in a mall. Before the 24 Hr Walgreens hada BofA ATMs but this year that changed.
We would LOVE to get another bank but do not feel any are healthy or secure. Add to the fact one bank chain here touts its standing with the local university and its sports programs but not providing needed information limits our choices. I don’t care if a bank supports the local sports programs, but to make that their focus is my concern with them.
So here we sit with BofA though we did move some money to a regional bank. There are no local banks I would trust and Wells Fargo does not have bank locations here.
Tony,
My suggestion is you look into a Federal Credit Union. Sure they had their problems in that past (as you note in your first comment about the FDIC), but at least in a CU you and the rest of the people that bank there also ‘own’ it.
I gave up on regular banks long ago, and still remain disgusted with them. the local BoA branch wanted my fingerprint, a copy of my drivers license and $6 in fees to cash a $15 check drawn from their branch by my daughters gymnastics school because they overcharged me on month… how’s that for insane? Not to mention that the pretty young lady behind the counter had ZERO manners and didn’t tell us about the cash fee until we’d provided all that other information, at which point my wife told her it was no wonder they were in trouble as a bank and she suggested the young lady find another job, QUICK and we walked out.
I have my mortgage with a credit union, and while it’s rarely a good place to invest long term money (they don’t pay the best interest rates), it’s been an outstanding place to borrow it. I also have an account at an old credit union my parents opened for me back in college in another state. Neither one has had very big problems in the mortgage mess because they didn’t get silly with their qualifications and neither sells their mortgages, instead choosing to keep them and presumably make more money by servicing them themselves. Contrast that with an investment loan I have on a rental property, which changed servicers so many times in 2009 I lost track.
Wells Fargo is just as bad. My wife banks at Wachovia, and while they’ve changed all the Wachovia branks to Wells Fargo in this area, she’s now effectively without a bank because they changed all the computers at the branch and WF people there can no longer see Wachovia account information. How’s that for customer service?!
I gave up on banks years ago. I use a Credit Union. My new wife still uses Chase and BofA but I’m working on getting her out of it eventually.
As for Cringely’s friend…my advice would be to find out if he has any equity left in the house. Then figure out if he really would rather rent a house for cheaper, then walk away if the answers are no equity and yes it would be cheaper. Sometimes walking away is the best course if you can’t handle the problem.
I’d also, before walking away, pull out all the metal fixtures and pipes and sell them as scrap. I’d also sell all the kitchen cabinets, rugs and bathroom fixtures on Craigslist. Then I’d let the weeds grow chest high and not water anything at all for four months before leaving. Leave it bare with nothing valuable inside and a big FU message in spray paint on all the walls for BofA to “reposses”. 🙂 Oh and a leave some pools of water in the walls for some dry rot and mold for good effect.
The worse they can do is sue him and even if they do he has no money anyway.
Just as a general note to anyone who reads this…If you’re thinking about “walking away” from a mortgage or considering other options like a short sale or deed-in-lieu, before you do anything, you need to consult with a lawyer and an accountant, preferably an accountant who is an IRS enrolled agent, to make sure you understand any and all legal and tax consequences of your actions. Don’t make a mistake you’ll regret later when you have courts or the IRS after you.
Jeeze, do you hate your neighbors that much? Think of what it will do to their property values and quality of life. Weeds that high attract rodents and cause all sorts of problems.
Destroying the house in that manner makes it virtually unsaleable and will further erode the house values for people living near it.
Yes, BofA may be bad, but do we want to really attach the “bad” karma to ourselves as suggested in Bryce’s response?
I didn’t invent the ideas…people are doing these all by themselves when they get forclosed. Also, unless you do like your neighbors and know them, you’ll more likely be thinking about yourself and your situation when you’re in this mess than about them.
Heck, most people I know in CA don’t even know their neighbors. A lot of people in these financial stress situations in the Central Valley also live in communities where vast amounts of tract houses are lying vacant already. My in-laws just moved from a street that had only four houses along it even occupied.
Yes it is bad Kharma to your neighbors, but if you really want to stick it to the bank this is the way to go. Besides, more than likely they’ll just demolish afterwards anyway if the house is trashed. You’re neighbors aren’t in this mess, you are. You’re the only one who can get out of it, and if you need the cash there’s a lot of it in the home in the form of construction materials, accessories and appliances for you to sell before you have to leave it to the bank.
You’re right though about the vandalism…it really isn’t worth doing unless you’re in that kind of mind space where your anger overrides your sense.
You may as well advocate burning the home to the ground as your propsed course of action is just as fraudulent and just as criminal – never mind what it will do to your credit status … and when it comes time to look for another rental that credit record just might make it impossible to find a decent rental. Do you like living in a cardboard box? What about a jail cell … the rent is really low, and they will even clothe and feed you?
I can think of two alternatives to national banks:
* Check out the credit union situation in your area. I like my credit union because our interests are aligned – both of us want to handle financial stuff at minimal cost. Banks, on the other hand, want to charge you as much money as possible without making you mad enough to move your account.
* A checking account attached to a brokerage firm can be a good deal, especially if you have retirement funds parked at the same firm. My Schwab checking account has a no-fees-anywhere debit card.
I must agree with the other who tell you — Join a Credit Union. Look at it this way — with banks, there are three classes of people: Stockholders, Depositors, and Borrowers, and in general there’s very little overlap among those groups. The purpose of a bank is to make money for the stock holders — they do so by paying low interest rates to depositors, charging high interest rates to borrowers, and charging as much in fees and penalties to both that they can get away with.
With a credit union — there is only one class of people. The Depositors *are* the Stockholders (Members), and you have to be a depositor in order to be able to borrow. Although a credit union is also out to make money for the members, it is counterproductive for them to charge onerous fees to everyone for every possible reason, so the fees are more reasonable and more appropriate. Further, since the profits have to go someplace, in general in comparison to similar banks, the credit union will pay slightly higher interest rates to depositors, and will charge slightly lower rates to borrowers. There’s no incentive to overcharge, for the profits have to go back to the members. Further, the Employees are very likely *also* members, so they have extra incentive to be helpful and friendly. It’s a Win Win Win Win for Credit Unions over banks. I’ve been out of banks for years because of this.
We are CU members. Our CU though is in another state and makes it impractical to do normal business with. At the time of our move from Oklahoma, we needed/wanted a national bank with a lot of ATMs. Now days I generally use plastic as cash, pay it off at the end of the billing period and use the ATMs very little.
But there are times when cash is the only thing that works. The CUs here might be okay but we are waiting for the day we can return to an area we consider home. Home is not where we live right now.
Some suggestions:
1) Join another credit union, one that’s local to your home or workplace. I’m currently a member of three — one from where I used to live/work, one where I live now, and a third where I work. Switch the bulk of your money/activity to the new CU, but leave enough in the old CU to keep the accounts active (you never know when you might need them).
2) Many credit unions have joined a network called CU Service Center — https://www.cuservicecenter.com/ — if your current credit union is a member of this, you can walk into a local/nearby CU that’s also a member and do business with your home CU, deposits, withdrawals, etc.. (And maybe that’s a good local CU that you’d be eligible to join per (1).)
3) Many credit unions (and a number of banks too) have joined a network called AllPoint — https://www.allpointnetwork.com/ — if your CU is part of it, you can locate many local ATMs that are part of the network, and your access with be surcharge free.
4) if your old CU is not a member of (2) and/or (3) — tell them about it, they may consider joining.
Credit Unions — they’re just better.
“What we have here is an astounding corruption of the mortgage market.”
What a strange day, when merely expecting people to live up to a long-term contract they voluntarily signed is labelled “corruption”.
…what a strange day it will be when mortgage servicers have to live up to a long-term contract they voluntariy signed with the United States government. In case you lost track, Bank of America and every signatory mortgage lending institution that took my money and yours during the bailout did precisely that, and yet oddly they’ve found literally every way they can to stall by working around the rules.
I think if you were closer to all this you’d realize your incredible oversimplification of the situation at hand. I hope you don’t have to look back on your lost equity and worthless home in 10 years to “get it”, but that will likely require nothing less than death.
“mortgage servicers have to live up to a long-term contract they voluntariy signed with the United States government.”
Citation needed, especially as to the putative commitments to lose money on existing mortgage contracts.
Two things:
1. BofA is not living up to their agreements either: https://www.nytimes.com/2011/08/31/business/bank-of-america-accused-of-breaching-mortgage-accord.html?_r=1
2. I suspect you’re thinking of this in terms of a moral obligation. It’s not. It’s a business agreement. Interestingly, the more wealthy you are the more likely you are to walk away from a bad mortgage and let the bank have the house. They realize it is a simple business transaction and treat it accordingly. Businesses break agreements all the time if they’re not to their advantage and they can do it.
“1. BofA is not living up to their agreements either”
OK, thanks for that link. Taking all that at face value (arguendo), the BoA defaulting on an agreement with the governments still would not excuse someone tearing up their prior orthogonal agreement.
“2. I suspect you’re thinking of this in terms of a moral obligation.”
Not just that. (Almost certainly, the economy works best when defaults are rare.) But that’s beside the point, since the Cringely was the one fanning moral outrage at “corruption” and such.
This, also too and such as.
https://www.legalnewsline.com/news/233704-masto-alleges-bank-of-america-violated-consent-judgment
The minute BoA has to settle with Ralph is the minute they find out exactly how much money they lost on that mortgage and a minute later get to tell people who thought they were investing in mortgage backed securities not to worry that Ralph’s mortgage was foreclosed because they had never conveyed the note to the trust anyway, and they own nothing backed securities so it’s okay.
If anyone here missed the Daily Show’s report:
“Mortgage Bankers Association Strategic Default”
it’s worth viewing!
A link:
https://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default
Bait and switch. How many people started off with fixed, and ended up with a variable over 11% when their fixed terms ended? We’re talking main stream banks here, because even Vinny’s Loan Shark & Bail has better interest rates.
My first mortgage was like that, fortunately we were able to refi with a true fixed loan at a reasonable rate. Lesson learned.
Hey,
I’ve been amazed at how stupid the public are about what is happening. Banks could care less about your situation, don’t forget money is the prime factor why.
If they can make more by delay so be it. If they can forclose they get a deal and bailout. You get nothing! (Except a tax bill)
Got to admit that this Cringley is a smart fellow. Hope that he doesn’t let anyone else in on this slaughter as the sheep might bolt from the pen.
Thanks Cringley!
Ralph’s story is why “bankster” is an appropriate term.
I know somebody who is the anti-Ralph; a coworker of mine named Dennis. In March, he received a phone call out of the blue from his mortgage servicer, Chase Bank. They wanted to refinance his loan for another 30-year term at a lower interest rate and they would cover ALL closing costs. He has a steady job. No missed payments. He thought it was some kindof scam and investigated. Nope. No scam. One day he went into their offices, signed some paperwork, and his monthly payment dropped. He’s waiting for the other shoe to drop, but so far it was a win-win situation for him.
Why would a bank do that?
Why would they do that? Several possibilities come to mind. Under the federal programs the banks collect a servicing fee from Uncle Sam for every modification case they originate, and another chunk of money when the modification is complete. The “generous” folks at Citi just made sure to get theirs.
Another strong possibility is the lack of proper documentation in the bank records for the loan. The refi/mod gives the bank a brand new set of documents with real ink signatures to replace the nothing burger they had before.
I hope your friends read carefully the terms of their new, modified mortgage. Banks are free to alter the terms, definitions, and remedies, and I suspect Citi’s legal department took full advantage of that opportunity to “tidy things up”.
But what the heck, your friends have a lower monthly payment, and that’s all that matters these days, right? 😉
money?
check again. look at the interest repaid over that 30 years, as opposed to how much interest he would have paid if the clock hadn’t been reset. i just had the same pitch from chase. i found that i would have repaid $78k more by refinancing at the lower payments now, as opposed to having higher payments at a higher interest rate, even though my loan is only 5 years old.
I just recently went through the refinancing with Chase, they also contacted me. A couple of points:
If you pay the lower rates for 30 years, yes they get more interest, but you have that extra money to do what you will, and in 20 years you may be making more on your money. Possible win.
You could always make the same payments and have it paid off in less years in my case I was about 4 years in on a 30 year, if I keep my payments the same it’ll be paid off in 19. I win!
Another reason why a bank would do this – to retain business, if you are in good standing, with rates so low they know you must be considering shopping . They make it so easy, with no barriers, no headaches, if you are busy it’s a no brainer.
I could be wrong but I see this as a win/win for both parties involved.
Why would banks want you to refi? Banks make money from interest, not by you paying the loan back. Since mortgages are compound interest; all the money is on the front end of the loan. That’s why on a 30 year mortgage it takes a real long time before the principle amount is reduced significantly.
As someone posted earlier, live cheaply or pay cash. A home is not an investment; it’s a home. If you want to invest in real estate, then look at rentals with positive cash-flow and solid cap-rates.
Because if they refi you on a new 30 year loan, you end up paying more interest over the life of the new loan than you would on the remaining balance of your own loan? Plus they get to tack on new fees and stuff, even though they say they are covering the closing costs. Plus they may get a government kickback for doing a loan modification.
No, they don’t make money from interest payments. They sell off your mortgage soon after the load is made. They make money from making loans, kind of like a commission. The ones holding the mortgage backed bonds earn money from your interest, but they do not have any control over your refi, as long as you are able to pay off the remaining balance.
If Ralph can’t afford his house, he needs to leave. Using taxpayer money to keep him in a house he can’t afford is pointless.
BofA is evil. They screwed my mortgage over 6 different ways including forced flood insurance from Loyds of London when I couldn’t even buy it myself because I was in IN A FLOOD ZONE! And at 4 times the cost from FEMA if I was able to buy it, and of course they took a 28% charge for “providing” me the service.
Luckily I got a small local bank to buy the mortgage. Screw BofA, I hope they do fail.
That was supposed to say WASN’T in a flood zone. Dame iPad autocorrect…
“Dame iPad autocorrect…”
So the iPad autocorrect is female. That explains a lot.
We bought our first house in 1984. A few years later I was threatened by a possible layoff. A local savings and loan held the mortgage on our house. I went and met with them. I explained my situation. This is what they offered to do for me:
1) If I lose my job, I will tell them.
2) If I am unable to pay my mortgage, I will tell them.
3) The bank would then “suspend” my mortgage while I look for another job.
4) No period of time was set, but the bank said they could help me for at least a year.
5) At some point in the future one of three things would happen — I would find a job in town, I would find a job out of town, or I would move to lower cost housing. So I would either be able to restart my mortgage payments or I would be selling the house.
6) If I stayed in the house the bank would recalculate the loan. They would add in the extra interest, calculate a new payment schedule, and we would sign an amendment to the mortgage.
That is how things SHOULD work.
A few years later our savings and loan fell into the trap that took out the whole industry. The Resolution Trust Corporation took over our mortgage. In the take over it was found our and 1000’s of others escrow accounts had been wiped out. So we had to kick in some more money to the RTC to cover insurance and tax obligations. Eventually the RTC sold our mortgage to another bank who sold it to another bank, who had no presence in our town.
If the threatened layoff happened 5 years later there would have been no office to visit, no loan officers to meet with in person, and no easy way to deal with the situation.
Now it is 10x worse. Our first mortgage on our present home was financed through a fund set up by a union. The union provided some cash from its pension program and a group of banks set up and operated a mortgage program with it. It was a win-win for us and the union’s retiree’s. Then our mortgage was sold to a bank, who sold it to another bank. We were sending payments to Salt Lake City to an institution that could not answer the phone or read their mail. Interest rates were dropping so we jumped at a chance to refinance and get free of the firm holding our mortgage. Then our new mortgage was sold to another bank who sold it to CountryWide. If you follow the news you know what happened to CountryWide and can guess who has our mortgage right now.
There is something not right with this whole picture. We have a 5.25% mortgage. Where is the value in reselling it to others? Where is the value in packing it up in a trade-able security? Why can’t I get a local bank to hold and service my home mortgage?
Oh BTW — when we applied for mortgages on our two homes, the process started with a one page questionnaire. We had to enter how much we made before and after taxes. We had to enter the value of the desired loan. We then had to do some calculations that would check to see if we could afford to make the payments. The last step on the questionnaire went like this: “If line [h] is less than line [g] then you may qualify for a loan. Please fill out the attached loan application and pay a loan application fee of $125.”
If we could not make the payments, the bank would not accept an application or even the application fee.
What happened though is that the banks discovered they could just resell the loan, regardless of how bad it was. So they got the rating agencies to take big steaming piles of crappy loans, repackage them, and sell them as AAA rated securities.
So the banks had no reason to care if the people could pay back the loans.
I refinanced earlier this year when the rate dropped to 4.25% (I was at 5.875%, and needed a little cash to pad my paltry equity in order to make the loan-to-value ratio 80%). I tried initially to go with my current lender, Wells Fargo, but opted to go with a local bank because I personally knew the bank loan officer. What I didn’t know was that we would also get some nice discounts due to my wife’s employer. It sometimes pays to go local.
The sad part of the story: Before I made my second payment our loan was sold to BofA. It hasn’t changed anything other than where I send the checks, but I really was looking forward to dealing with a local bank and local people (in person!). Oh well.
One thing I keep hearing is how someone chooses to deal with a small, local bank, and then the loan is sold to a giant bank like BoA. BoA (and its cohorts) just keep buying, buying, buying until they own everything … it’s as if the small, local bank doesn’t even have a *choice* but to sell to BoA.
Is it possible BoA is doing some sort of “predatory buying” and, using their capital, offering such sweet offers to purchase that the little guys simply can’t refuse?
What’s going on here?
Bingo.
What’s going on is the market working as it should. Back in the 60’s I got a credit card from a local bank (Bank of Boston) and later it became a Chase credit card. So what. If Bank of Boston is entitled to leave a business is no longer wants and I’m free to stay with Chase or search for a better deal. It’s most likey win-win, but if not at least it’s fair.
All I know is, there is one expanding mortgage office in town.
They are the ones who still advertise “no down payment”, very very low teaser rates, “we can finance anyone”.
There is a way. Get the cameras on them. Just before I moved to my new neighborhood, I read an article on the local blog about a lady who was in a *very* similar situation. The neighborhood organized a protest and benefit, picketed the hell out of B of A, got the news cameras out…. late yesterday, we got this:
http://westseattleblog.com/2011/08/village-green-foreclosure-fight-bank-of-america-announces-a-decision
Of course, the press release is spun faster than the engine in my little Ninja (14,000 RPM!), but still. We. Won.
The more Klieg lights we put on this thing the more B of A will have to capitulate. I betcha Ralph gets a call in the next few days. If he doesn’t, his next move should be to call his local TV station. Dirty laundry *sells*.
But I heartily third/fourth/whatever the recce to Get Thee To A Credit Union Forthwith. The lead graphic on FirstTechFed’s website is “Pancackes flip. Your mortgage shouldn’t.” (Just a VERY satisfied customer thereof.) I’ve had three since firing WaMu back in 2000, *before* all this foo-faw-raw hit… and I’ve been quite pleased with the result.
I’m sorry Robert X but your friend is using the wrong person for kicking the bank straight.
He should try the New York Post’s JOHN CRUDELE
— he seems to get to the stony heart of bankers and make them see the light!
Everyone in the financial world knows that BAC is kaput. There isn’t enough money at the FDIC to shut them down and far too many politicians would miss the generous campaign contributions if they were actually shuttered. What we are seeing now is a controlled liquidation where BAC sells off assets while its corporate officers retain their jobs (and bonuses), the pols get their checks, and the ATMs still spit out crisp 20s. Even crusty ol’ Warren Buffett was able to call on a favor or two and saddle up to the trough with a sweetheart deal.
At some point BAC will be nationalized, and they truly will be the Bank of America — lol.
BoA won’t be nationalized. they’ll be dust. they’ll be Lehman Brothers, but almost all assets will live on.
the steaming piles will end up at FDIC.
the former execs will be on their private islands with their new yachts and trophy wives.
it’s not “too big to fail.” it’s “I’m in the clique.”
a few jail doors clanging on guys who just traded Italian suits for prison orange, big guys, and the games will stop for about a year. that’s enough time for a really determined, bright-eyed, fresh batch of electees in Washington to put an end to the game by reregulating the banksters.
Basically, government is failing us, the people. Not so for any large for profit entity; the US government simply allows all this to happen. Simply look at the effort to get the Consumer Protection agency going – it tells the whole story. And what party gets into office is mute – all politicians, regardless of their intent, have to play the game, and it’s stacked fully against the real people of this country.
What we need is a real people’s revolution to get the government to work for real people, not the made up corporate people that have have been reaping more cash and profits than any other period in history. And I don’t want to hear any crap about socialism, communism or “wealth distribution” – there has been wealth distribution all right, taken from the pockets of the middle class straight into the top 1% of the population.
If corporations are “people”, then they have an obligation to be loyal to the nation as a whole, as we all are. That means paying your fair share and considering more than just the bottom like. I’ve had enough of this bottom line only thinking and the results are obvious – the pain of the many and the joy of the few. This is not acceptable.
Sure, the government failed. If failed to stop people from buying houses they could not afford.
You need to watch Repo Games to see what happens when people buy cars they cannot afford.
That’s the bank’s job. In fact, that’s the bank’s only real value add in the process, and if we’re not paying them for that, what ARE we paying them for?
OK – and along with the banks, it appears that S&P is still up to their old tricks with setting sub-prime backed bonds at AAA:
https://www.cbsnews.com/8301-503544_162-20099897-503544.html
https://www.businessweek.com/magazine/when-credit-ratings-lose-their-meaning-08312011.html
I’m betting that the “other shoe” has not yet dropped and when it does, it will be another left, just like the last one – this monster has more than 2 feet and all the shoes will have to drop before we can go on with life.
S&P, Moodys… the new Genovese and Nitti families.
Where are you getting the 7% average rate figure, that is way too high. If someone locked in a 30 year rate figure over the last decade they are certainly paying a higher rate than the current one, but it is not 7%, probably closer to 5.5%. And if like me they went with a fixed to a variable, or a straight variable with the intent of refinancing they are making out just fine as they haven’t had to refinance and the variable rate has gone DOWN.
These banks are disorganized, sloppy, unmotivated and scared of their own shadow but they aren’t making 7% on too many mortgages.
if you admit to a new paradigm, you have to follow the rules.
if you don’t, you can happily report on every examiner form that your vault is full of performing assets, and you can keep on going regardless.
until the day they shut you down, in which case you move to your vacation city and relax.
there isn’t any tolerance out here on main street with the shenanigans of Wall Street and the bit players that are the “local” banks. 0.076 percent of the nation doesn’t get that, and doesn’t care.
I can think of 470 odd folks who should find that out the first Tuesday in november, 2012.
just a thought.
Everyone in this country needs to wake up and educate themselves. Here is a start:
https://www.youtube.com/watch?v=l37RhdFGVsM
For me it’s this simple: if you have a house you cannot afford any more, you must sell it (even if it’s at a loss).
Why is it that when everyone’s home was appreciating, we heard no wailing. But when the values drop – which was always a possibility – it’s now not an individual problem, but a nation’s problem?
I have been renting with my family because I live in the most expensive region in the US, and in spite of my good income, it’s been too risky to buy a home. What if I *do* lose my job? If I can’t cover the mortgage for a year or more on savings, or if the monthly payment is “n” percent (let’s say 50) of my pay, I actually have no business buying the house.
But people did, and they used their homes like ATMs, and now it’s MY problem?
Sorry Bob, I don’t recall the specifics of your friend’s situation, but if for one reason or another he can’t re-finance, it just means he has to continue doing what he was doing since day 1, right? Make a fixed monthly payment as he agreed to?
What am I missing?
You’re missing that if you have to sell your house for less than you owe, you have to negotiate a deal with the mortgage holder (through the mortgage servicer). The mortgage servicer would rather force you to pay a few additional months on the mortgage you can’t afford in order to force you into foreclosure than to allow you to write off part of the loan balance. This screws both you and the mortgage holder, but earns a few months of extra fees for the servicer.
The point you’re missing is that we’ve as taxpayers are effectively backstopping the underwriting of the outstanding loans through Fannie/Freddie. We currently own the risk for the underwater loans, regardless of how we got to this point. (And we got to this point because of the repeal of Glass-Steagall requiring us to use taxpayer money to protect otherwise innocent savers from having their savings lost by the investment bank arms – big problem in the Great Depression, mind you, which is why G-S was initiated in the FIRST place). So, the banks underwrote loans with no money down and made a ton of money on the upside and now have changed the downpayment requirements so that they make a ton of money on the downside – after we bailed them out from failing. If Glass Steagall were still in place, I’d say let them fail and everyone else, too, but it isn’t so we can’t. So, why should we as taxpayers keep the banks from failing AND let them profit even more by letting the homeowners fail? Effectively, we punish only the homeowners and not the banks, not to mention it keeps the economy stalled for years to come and we ALL suffer. So, let the banks take part of the haircut, let the homeowners refinance and let us taxpayers get an improved economy. It doesn’t cost us any more than we’ve already spent. Plus, it seems only fair, especially now that the banks have had several years to make billions on the difference between the sweet, sweet low interest rates they’re getting as stimulus and the high rates they’re still receiving on the old loans.
Oh, and just to be clear, I’m not talking about cutting the principal of the loans. People owe what they owe, that’s their tough luck. But the fact they can’t refinance into today’s government stimulus low rates because the banks changed the rules to suit themselves and pocket the difference after they took all our money to bail them out, that actually IS our problem and it’s hurting our economy, which is ALSO our problem.
That is the reason I consider it my problem, anyway. I personally had no problem refinancing because I had enough wealth I didn’t need to. I’m mad I’m subsidizing a bunch of banks who are profiteering from our economy going down the tube. And I’m mad at the politicians who repealed Glass Steagall and at those who won’t even discuss reinstating it. Every land bubble (and they are relatively frequent over long periods of time) will risk turning into the Great Depression until it is reinstated.
THAT is our problem, too. And our children’s problem. And their children’s problem…
My primary home mortgage is with IndyMac, which closed due to a bank run caused by a public warning of their solvency issued by Sen. Schumer. My mortgage payments since have been to the rebranded IndyMac Federal Bank. My wife and I always aggressively paid down the principal, overpaying the interest due deliberately. Since becoming a “federal” bank, however, any amount we overpay NEVER goes towards paying the principal down, it continues to be credited towards the interest. Do I have to tell you if our calls and emails and letters, often cc’d to our elected officials including Sen. Schumer, have fixed this self-serving “error”? BASTARDS! Now I feel better.
Stop paying, Ralph. Here in NY, it takes an average of 600 days to foreclose a mortgage. How much money can you accumulate if you stop paying your mortgage and property taxes for 20 months? I’d bet it’ll be enough to get your family into a very nice apartment, with a substantial amount set aside for the down payment on your next house once you clean up your credit.
No way!!! I dealt with Tawanna Banks too!!!
I guess that must be one of those fake ‘department’ names.
Anyway, they screwed up mine and I ended up doing a short sale. Good riddance BofA.
Ralph needs to talk to this lady. She fought BofA and WON! https://www.seattlepi.com/local/article/Seattle-woman-wins-foreclosure-fight-against-Bank-2151109.php
You also have to take into account in any of Bob’s mortgage writing that he bought way more house than he could afford and is massively underwater, so most of his solutions and articles about it are entirely self-serving.
I imagine BOA having some gigantic shredders and running the incoming mail through it without even opening it.
Indeed
https://www.nytimes.com/2011/09/02/business/us-is-set-to-sue-dozen-big-banks-over-mortgages.html?pagewanted=2&_r=1&hp
Well well, it looks like Uncle Sammy wants to get a place in line to pick what little meat is left on the bones. BAC, WFC, JPM, C … RIP!
Couldn’t have happened to nicer people – lol.
The sad part is only the people rich enough to not need refinancing have actually been able to get refinancing, even though the actual risk to us taxpayers is exactly the same on an underwater loan since we bought out Fannie/Freddie. Our government is handing out stimulus (fiscal and monetary) on one hand and blocking it from the middle class on the other. We’re not getting the economic boost we’re paying for. Instead the bankers are basically just siphoning off the low rate stimulus we’re providing with the spread on loans they won’t refinance.
Senator Boxer (some time ago, mind you) introduced S.170, “Helping Responsible Homeowner’s Act” which basically requires Fannie/Freddie to underwrite refinancing of underwater loans for which they already carry the risk:
http://boxer.senate.gov/en/press/releases/071211.cfm
This is a bill everyone who wants to see a economic turn around should support. Waiting for the trickle down from banker profits to the middle class won’t happen. Going to have to force it a little bit or the middle class and therefore a large portion of our economy won’t recover.
Here is an article of interest:
https://www.advisorperspectives.com/commentaries/ira_72111.php
Here is a quote from the article:
“Remember that the biggest holders of these RMBS are the GSEs themselves and the Fed, followed by banks and private investors. But because of the actions of the GSEs to prevent Americans from exercising their legal right to refinance, the holders of the high coupon securities have been overpaid for years.
Hundreds and hundreds of billions of dollars worth of Fannie and Freddie securities should have prepaid years ago, but instead the GSEs and other holders of these securities have been receiving above-market yields on their investments. This is not only unfair to American home owners, but it also means that the US economy is not going to recover until the government forces the GSEs to change their LLPAs and aggressively start to refinance these high SATO loans.”
rmb, gse, llpa, sato. Thanks for clearing things up. 🙂
Is Ralph aware of new bankruptcy laws?
“When this new bankruptcy law was passed, no one complained that it interfered with the sanctity of contracts: at the time borrowers incurred their debt, a more humane – and economically rational – bankruptcy law gave them a chance for a fresh start if the burden of debt repayment became too onerous.”
Today is reminiscent of 19th century UK or 1990’s Russia – but this is Corruption, American-style. It’s not that judges that are bought, but the laws themselves, are bought. See Justice for Some:
https://www.project-syndicate.org/commentary/stiglitz131/English
These parasites syphon the economy’s hemoglobin:
http://mobile.salon.com/opinion/greenwald/2011/08/22/banks/index.html
Admit it, Boob: You are ‘Ralph’.
🙂
What we are experiencing is the result of governmental involvement in the credit markets. Without Fannie and Freddie, lenders would have had to do good underwriting to survive. The Fed went nuts printing money out of a misguided fear that Y2K (remember that?) would cause a liquidity squeeze. The securities laws resulted in rating agencies’ facilitating bad investment decisions. If we had not had Fannie and Freddie or the rating agencies and the Fed had not pumped up the money supply we would not be in this mess.
Now we’re closing a hundred banks a year and scaring hell out of those we leave open. Bank employees are subject to million dollar fines without the right to trial by jury.
There is one other problem, the bankruptcy code does not facilitate reorganization of consumer mortgage loans the way it does corporate debt, e.g., General Motors.
Appropriate changes in the bankruptcy code and the elimination of government interference in credit decisions would do more to prevent a recurrence of the problem than would any consumer protection agency. The market is the solution, but getting back to a market-driven environment would be a difficult task, even if Congress were smart enough to try it.
“What we are experiencing is the result of governmental involvement in the credit markets.”
Umm, no. Many would argue that what we are experiencing is the result of the repeal of the Glass-Steagall Act (the Gramm-Leach-Bliley Act) and the deregulation of derivatives.
https://www.nytimes.com/2008/10/09/business/economy/09greenspan.html
http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act
Gramm, where did I hear that name before? Oh yeah:
https://www.huffingtonpost.com/2011/08/25/rick-perry-texas-life-insurance-scheme_n_935666.html
Back in 1940, my uncle…now gone off to his reward…jumped ship in NYC. He and some of his ship jumping buddies were eventually picked up by immigration. Immigration made them a deal: Join the US Army or go back to Europe, “We don’t care if there is a war going on.” They joined the US Army. When my uncle was honorably discharged, he was given his citizenship papers. At that point my uncle got a job working as a longshoreman in NY/NJ.
From 1945 my uncle worked the docks. In 1953, he managed to get his family out of Europe and to the USA. That same year he bought a 4 unit building in Jersey City….FOR CASH. My uncle, his wife and their 3 European born children…later they would have another child born in the USA….lived in one apartment and rented out the other 3 units. My uncle continued to work his dock job. As the 3 European born kids became old enough to get jobs, that’s what they did….no college for them, although the American born child did attend college. In 1960, the oldest daughter was married and she and her husband bought their first house in Cliffside Park, NJ…FOR CASH. Two years later my uncle’s son was married and bought a 2 family house in Jersey City…FOR CASH. Daughter number 2 bought a 14 unit building in West New York, NJ with a mortgage, she rented out all 14 units and lived with her parents until she was married. After she was married, she sold the 14 unit building and had a new single family house built in Bergen County, NJ…FOR CASH.
Oh, and while all this was going on, my uncle managed to sponsor my father…his youngest brother….so he could get out from behind the Iron Curtain and come to the USA.
Compare and contrast the above with the situation we have today. Back then a new immigrant with limited English skills, and no education, but with the desire to work, and the ability to obey laws and stay sober during the day could build himself a financially secure life. He could keep a roof over head, raise a family, buy a car, spend a couple of weeks on the Jersey shore, and see a doctor without being bankrupted. Today? Most native born, with masters degrees can’t duplicated the above. Not unless they are bankers, Wall Street swindlers, politicians or lawyers. Productive work no longer pays. Whose fault is that? I agree with Bob, it’s our fault. Our fault for believing the, “Have I got a deal for you!”, bullshit. Out fault for not dragging the “to big to fail” swindlers into the street and introducing them to Madame Guillotine.
Don’t worry, Cringe …
Your demo buddy Barney Frank will “fix it.”
Fissile, you touched a nerve. Your family history is similar to mine, and as I am currently obligated to 2 mortgages I can only dream of life without them. And then I recalled that none of my Italian immigrant ancestors had purchased their homes and investment properties with cash. How did they do it? Has financing wildly inflated the cost of real estate? Or is it that goddamn American fantasy of ownership, and instant gratification that’s screwed us? My dad once pointed out that if you had got a decent job out of high school, stuck with it, and your young wife did the same, lived in a reasonable rental or with your folks, that you could buy a house with your savings in your late 30’s or 40 at the latest. But now we want “ownership” (an illusion is you have a mortgage) in our mid-twenties. And so we are willing to pay for the illusion, and Lord how we pay. That’s ultimately Bob’s point, I think.
Sorry, that should read, “ALL of my Italian immigrant ancestors purchased their homes and investment properties with cash.”
[…] Mortgage Reality Distortion Field Robert Cringley (hat tip reader kurt h) […]
“Is an organizations that asks for extensive paperwork then loses it as many as eight times simply incompetent or are they evil? My money is on evil.”
It sounds like Bob has taken a different set of pills this morning! He usually gives the impression that he is fully onside with all the stupid crap that goes on in our world of capitalism and daily market failures. What was the last thing? Oh yes, patent portfolios!
This article suggests that he has finally seen the light and realises that we have to get rid of the current system and replace it with something based on human values and cooperation (always more efficient than competition). Given that we live on a finite planet, we also need to give up systems based on growth before it becomes completely impossible without moving off-planet Something americans (small “A” now) can no longer do.
Your argument might hold water if we actually practiced capitalism in the USA. Under capitalism, bad financial decisions, poor customer service, and violation of laws result in business failure. This creative destruction flushes out the marginal players and keeps the rest looking over their shoulder as new businesses are formed on a regular basis.
Look at the reality of what we have today. Multinational corporations buy politicians and ignore laws. When convenient, the big boyz use the legal system to suppress smaller competitors or arrange for government regulators to create a hostile business environment that discourages business formation. The capital markets have been turned into casinos where a long-term investment is now seen as a fool’s errand, and robots trade shares with holding periods of a few seconds.
Please don’t equate the quasi-fascist scheme we have today with capitalism. It has more to do with power and control than the creation of opportunity and wealth at all levels of society. The people running the show are not capitalists, socialists, or Marxists. George Orwell summed up their mindset in a rather chilling way:
“The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power.”
— G. Orwell, Nineteen Eighty Four
The delay, deny and ignore tactics are obviously an intentional strategy by banks to slow or stop people from getting loan modifications. They are just on the edge of illegal, assuming that laws are still enforced as regards banks. This will continue until we get a new congress, a new president, and a new attitude of “We’ve had enough.”
Ralph may not have a mortgage w/boa. I doubt if boa can produce THE note Ralph signed with his BLUE INK signature.
The biggest distortion is that real estate always appreciates. Sometimes, especially now, it just doesn’t – or worse yet, depreciates. People take out long-term mortgages in hopes of ever-incresing equity value. That bubble has burst.
Property taxes & insurance NEVER decline. And you know what? Even if you pay off your mortgage, if you don’t pay your property taxes the county just takes it from you. So you NEVER, EVER actually own property in the U.S. The system won’t let you.
I live and work out of a 32 ft, RV. (Cringely can really relate to this). I’m 56, work on a laptop in a Hawaiian shirt, short pants, & flip-flops – all over the country. If I don’t like the weather or the neighborhood, I just move. And – here’s the cool part -I pay my insurance by the mile – not month. If I don’t move it I don’t have a bill.
Real estate, mortgages, etc. – who needs it? Not me!
I am so happy to not be part of that insanity. How did I escape the booby hatch? Easy — I have a private, interest only mortgage with my parents with a balloon payment due when they pass on from this world with the mortgage to be dissolved as part of my inheritance. I get a low cost mortgage, and they get a continuing income which they can count on because I love them and I would never miss a payment. They benefit, and I benefit, and if I lose my job I have an easy time renegotiating the mortgage by simply sitting down at the kitchen table and talking directly with my “loan company”. (I also get a nice home mortgage interest tax deduction – and even if the tax code changes to take that away from the American home owner, I still have an affordable mortgage).
[…] that borrowing includes tail risk of a Kafkaesque lack of control. Trouble likes […]
I have a delightful Catch-22 for you. I have a decent loan, 30 years at 5%, with a 3-1 loan-to-value ratio. I am in good shape.
I heard that 15-year fixed loans were in the low 3’s so I checked with my favorite broker. At 3 1/8 I decided to proceed.
Fannie Mae will not approve a loan without 3 comparables for the appraisal. I have a home style that is rare, with only about 15 units in the development, and none has sold in the past 2 years. Since they were built in 2002 only 5 or 6 have turned over — the houses are very desirable and pretty new.
So I can’t get a refi. And, how on earth is the next person supposed to sell their house? Now that there are no comps, there can never be mortgages unless the houses are sold for cash!!!
Has the pendulum swung too far?
I still don’t see why you can’t get 3 comps. Appraisers get paid to appraise, so get 3 of them. Or are you saying you must get 3 actual loan offers and you can’t find 3 banks offering you a loan?
You think banks are fun. Try insurance. You know it is so far impossible to get disability claim through for my wife who can barely walk. They still collect the premiums though. This is going on for four years now and the second set of attorneys. Try to refinance with no income. That is just a little harder than above.
Now send to kid to Switzerland for college and try to prove the your BC BS insurance is valid over there. BC BS says it “is” Switzerland says “it could be”. You have to document with proof. There is no ways BC BS will send us that document even though the policy says it is so. There is clearly to much BS in BC BS. Without this Switzerland for free public insurance collects an additional $3000 plus per year.
It sure is fun being the little guy out here.
And the folks in DC can not understand why there even is a T Party.
I’ve been following the evil of the banks throughout the crisis. Only wish I was smart enough to have seen it sooner.
I did have the early belief that their behavior is evil and instructed my then 26 year old daughter to use that word when dealing with Chase operatives. She did not flinch and the world has a purer spirit for that.
EVIL – for me that means hurting someone just because you can.
Please consider poking your head in the door of your bank’s mortgage pusher and asking him/her how their evil work is going today.
Yours in foreclosure. Regards.
[…] upon a time, there was a bill that would force lenders to accept lowering of interest rates. This was deemed too friendly to citizens, not not friendly at all to banks. And so it was written […]
I tried to refinance my house mortgage in 2010, and encountered something similar. I wasn’t behind on my mortgage, I wasn’t underwater, my house was worth half again what I had paid for it, my wife and I had excellent credit, and things STILL fell through.
We were switched from one mortgage processor to another to another to another. Every few weeks I would be told about a new repair that had to be made to the property before I could sell it to myself. I sent in all the documents they requested, then waited for the next step. It turned out (as I understand it) that half of my documents had gone to one person, and half to another, so each of them was waiting for me to send the remaining documents. Three months after my initial inquiry, winter weather made it impossible to do the required repairs; two months later we still hadn’t closed, interest rates had risen, and it was no longer worth doing the refinance.
I wrote an angry letter and got the company to waive my nonrefundable $500 application fee, so at least I wasn’t out the money — only a lot of time and hassle. But I had to wonder whether all the runaround was partly intentional.
Speaking of insanity, I have just applied to refinance my mortgage. In the past three weeks I’ve worked with three or four different company employees. I don’t know whether it’ll work this time….
Regarding the story about “Ralph”… Once is a coincidence, twice is curious, three times is enemy action.
Bob, I am very late in this discussion but this point of yours especially depresses me so I must comment anyway.
Quote: So Ralph is crazy, but more than that we are all crazy, because here we sit rooting for him to get the damned mortgage modification when it is obvious BofA isn’t going to let it happen.
But why won’t they?
[b]What is it Bob with the USA.[/b]
Is your country just too big that the noise doesn’t get through? Is it your strange political system of government that is so far from the people no one has a change to stir it to action. Is passing the buck how your system works?
I just can’t see this happening in Canada, Australia, Britain, Germany, Italy, France, China, . . . .
I see no hope for your country. The rest of the world will probably just pull away and like me, shake their heads.
Yap all you want, nothing is going to come from your efforts or anybody else’s from the sounds of it.
If I were an American I’d be so distressed, feel so cut off from my country, my government, I’d probably head to some temperate hills with a tent, tools and some seed, a few chickens (one cock) and a survival book, probably “My Side of the Mountain”.
Good luck to all the Ralphs. I hope there’s enough mountain space.
Personally I’m glad to be part of a country where all people, both rich and poor, are expected to keep their agreements. Since the majority of folks are not wealthy, I’m more likely to be dealing with someone who is not wealthy. And I certainly hope they understand that keeping agreements is fundamental to a sound economy.
Bob,
A bank is an intermediary between savers and borrowers, that’s it. Banks exist for a very simple purpose: to enable investors to make interest on their savings and enable borrowers to get access to capital in exchange for that interest. If you expect banks to take actions that goes against the interest of their investors, you may have just established a better definition of insanity: expecting people to do stupid things.
Mark
Exactly, you can’t blame banks or the broader financial system for doing it’s job. But you can blame the government for giving them the financial incentive to do things they otherwise would never do.
It is his donation to BoA that made me start disliking Warren Buffet. BoA is crap in many respects. Let them fend for themselves.
While I applaud Ralph’s persistence I question his logic. I once herd it said don’t expect a different outcome if you keep trying the same things.
This in mind, I have herd and learned from his plight. My approach will be signifigently different from his.
I will be putting in the paperwork for this program myself. My plan will include my very intimidating personal presence in the local office of the bank that will be “handling this process”.
Let me make this clear, I will go down to the local bank branch and demand that the person in charge do all further contacting and processing in person. I will make it perfectly clear that I will not leave until the proper outcome is achieved.
Now bear in mind, that I am a former Marine and can be very intimidating. I will also welcome any involvement from local law enforcement, as I am politically connected in the county. Read: I greatly helped the County DA obtain his office. I will also have the local news paper on speed dial so that they will be able to cover this unfolding debacle in full detail.
The bottom line is that I suggest that all one has to do is to; make the pain of not dealing with you more that the pain of pursuing their agenda.
This stratagem may not work either but, I know that his plan doesn’t. I will keep you all posted.
I had the exact same experience with BofA. They lost my papers so many times that I lost count. They would tell you they had a document and then send a registered letter saying that form had never been received. They told me that one form would have to be resubmitted because it was missing my social security number. I asked if they would fill it in but they said that it isn’t their job to fill in the forms. I asked if it wouldn’t have been easier and faster for him to enter the SSN than argue with me about it. They later told me that the form actually was complete including my SSN. I talked to one person at BofA and they told me that I had been rejected for a loan restructure and that I had missed a deadline to resubmit with another department. I told them that I had never heard of sending any info to this other department. They then told me that it wasn’t their job to inform me of this information. I have since found out that the “Obama administration” had laid down the law but the law said that the banks only need to redo the loans if they want to. I have never missed a payment (my savings is gone) so why would they do anything for me? The banks got payed for the properties and still owned the properties after they seized them from the owners. The people who went through the loan restructure process were all told to not make their payments to the bank as usual but instead were told to make payments to the refi people. But when they were turned down, the people found out that the bank considered all those misdirected payments, late. Usually they were a year behind. So not only do they lose their house, their credit is destroyed and they can’t get another house. Thanks alot for all the “help” from the Government. But then they all have great job that they can never lose.
I dealt with BofA and all their BS but finally decided to give up trying to get a refi until I got a good job which I did. I get paid $50 an hour to write software. BUT evidently being paid $2000 a week doesn’t count if it is considered 1099 pay instead of W2 pay. W2 people evidently are guaranteed a job and can easily get a loan based on what they make today. 1099 people have to show income for two to three years. WTF
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