*Transcendental *Logic

In the mood for a good conspiracy?  How about the story of a CEO who tried to warn Wall Street years ago about the terrible risks of naked short-selling (basically the behavior that caused the current fubar), and was rewarded with a slew of falsified Wikipedia entries and other fabricated news-reports that he was off his rocker, all of which can be definitively linked to the Wall Street Journal and other industry players?

I know it totally puts the surreality syrup on my Monday.  Especially since I remember reading some of the articles about how batshit this guy was; in fact, the ruse worked so well on me that when I saw his name on this article, my first response was, "Oh yeah, that crazy guy that nobody should listen to."  Yeah….whups.

(via /., because I like /.)

(Also, neat quote from the forums there:  "Stay tuned - the music has stopped on Wall Street and everyone is looking for chairs.")

Real vs. Speculative:

“The real economy need not suffer in the downfall of the speculative
economy. If anything, the real economy has been repressed by the
speculative economy. Real farmers have been crushed by Big Agra, real
druggists have been crushed by Wal-Mart and real transportation
alternatives have been crushed by Big Oil and Big Auto.

The opportunity here, while the big boys are down, is to rebuild the genuine, local commercial infrastructure…“

From.  And thanks to.

Okay, I said I didn’t want to quit the subject of foreclosures without saying something useful about it — with all I’ve experienced counseling and helping people who are facing, avoiding, or going through foreclosure, it just doesn’t seem right to bitch about work like I did a few weeks ago, and then just leave it at that.

So. This is all nothing but an informed opinion (I AM NOT A LAWYER), but maybe it’ll help you or someone you know. And then I think I’m done with this depressing subject for now, if that’s alright with you. ;)

If you’re suffering financially and worried about your mortgage:

BASICS:

1. Pay your mortgage FIRST, barring essentials like food and medicine. Pardon my french, but fuck credit cards; they are unsecured and while they can be a pain in the butt debt to have, you can’t lose your house over them! Similarly, if you’re looking at having to put a house payment on a credit card, do it rather than missing a payment. Missing a payment puts you in immediate risk of foreclosure, not to mention hurting your chances to refinance. Don’t do it if at ALL possible. If you have to miss payments, at least make sure you don’t get 90 days (3 payments) behind — that’s typically when foreclosure proceedings begin.

2. Do not make a deal with anyone that you heard about through a mailer, a sign on the road, etc.; they’re almost ALL scams. If you need to cut some kind of deal, these are the only people you should work with: A trusted attorney or nonprofit, family you really really trust, and your mortgage lender / servicer. Consider everyone else a likely scam. Visit the Federal Trade Commission website (www.ftc.gov) if you want good information on foreclosure scams in general. If you’re not sure about the scamminess of a particular offer, ask a local politician (congressperson, governor’s office, etc.) to look into it for you. If you find a scam, bring it to the attention of your state’s Attorney General; they usually have a web-page that tells you how.

3. Don’t ignore a second mortgage or home-equity loan. Those are secured against your property too, and they can pull your house into foreclosure if you don’t pay them. Also, while the first mortgage has the biggest say in any mortgage workout or deal, the second mortgage company has some say; and moreover, they can actually be an asset. If the home goes to foreclosure, a second mortgage company typically gets zilch, so sometimes they’ll even help you talk to your first mortgage company in order to protect their own interests. Lastly, you probably have a personal obligation to pay your second mortgage or home-equity loan (in addition to the lien on your home), so you don’t want to settle up with the first mortgage and/or walk away, and then find out later than you’re getting sued for several grand anyway!

4. NOW is the time to learn all about the foreclosure process in your state. You want to understand what could happen WAY before it does; that way you’ll recognize the signs, and know how much time you have between certain events, and be able to orient your plan of action(s) with the reality of how the other players (banks, courts) are going to act. If you’re smart, the second you realize you may have a problem paying your mortgage, you’ll be all over the Internet or the Library or a local professional, finding out everything you can about the foreclosure process: When does it start? How long does it take? At what point do you lose the ability to cut a deal? What programs exist in your area that might help you set things right? (Every state has some, though most of them don’t help many people, to be honest. Still, you might qualify, and the earlier you find out about them, the better your chances.)

YOUR MORTGAGE COMPANY:

5. Stay in insanely close touch with your mortgage company (or servicer), even though you will feel 90% of the time like it’s a completely useless waste. They have obscene phone-trees, clueless reps everywhere, and will drive you absolutely insane. (If you can’t handle keeping track of five calls a day in what basically amounts to a massive customer-service nightmare, and you can afford it, hiring an attorney, or finding a nonprofit, to do this part for you can be a good idea.) Also CALL THEM EARLY, basically the second you notice a problem. They will take forever to do most things, so you don’t want to be just beginning the process with them while the clock ticks for you!

6. Talk to "Loss Mitigation" or the Legal Department, even if you’re not late on your payments. Customer service cannot help you if your mortgage is in trouble; they will just brush you off, often causing you to waste valuable time waiting for them. The way to get help from your mortgage company is also not to stress what a good customer you’ve been and how good your credit is — that only tells them that you should be able to continue making your payments! Insist, to whomever you get on the line, that you’re in trouble and you can’t keep making your payments (even if you haven’t missed any yet, which is the best time to start calling) and that you need to talk to Loss Mitigation or their equivalent department. Be very wary of people who tell you to miss payments just so you can get through to the right department — occasionally this is necessary, but most times you can just bully them into letting you talk to loss mit.

7. Don’t play the help-me-I’m-a-perfect-customer card. When you get on the line with loss mitigation, continue to stress that you cannot make your payments as they stand, and you really want to keep your home and work something out. They will probably send you paperwork, requesting a "hardship letter" and some proof of your troubles. Get a specific name and phone number of the person you need to send it to, and use that person as your contact from now on, or every time you call you’ll be starting over! Write a short, to the point hardship letter detailing why you can’t make your payments anymore. Include bullet points like "January 2008: Lost my job. April 2008: Unemployment ran out. July 2008: Savings ran out." or "January 2008: Payments increased $500 per month due to ARM adjustment. April 2008: Car accident caused $10,000 in medical bills" — that kind of thing. Don’t lie! End the letter with a statement like, "Because of the above, I cannot make my payments and do not expect to be able to make them in the foreseeable future." They often ask for loads of highly personal information as well, such as your taxes and pay stubs. We usually don’t send it (or we ask them for the name of the person who will be responsible for keeping it confidential, and they drop that requirement). They usually aren’t equipped to handle that kind of information, and either don’t use it or misuse it. The hardship letter and some basic proof is usually enough in my experience.

8. Know what you need and ask for it; don’t call them seeking "help". They’re a bank; they don’t "help" people (regardless of what they say to the press). Do you need payments that are $200 less a month? Do you need your interest rate lowered? To get your ARM turned into a fixed-rate loan? The total loan amount reduced so you can sell your home? To walk away without taking the hit for a foreclosure on your credit report? Mortgage companies can do all of those things, but they’re not going to just because you ask for "help". Get professional advice to help you figure out what you need, if possible.

9. Remember that you’re negotiating — however much they make it sound like this is about "policy" and "procedures", it’s not; it’s a straight-up negotiation between you and them. (This is why lawyers often can get better results than you can: They know that, and they know the laws, so they know what’s at stake on both sides. If you’re just not a good negotiator or you know next to nothing about the mortgage world, you may be much better off hiring a lawyer.) That means all the usual rules of negotiating apply: Don’t tell them things they don’t need to know that hurt your case; start asking high and expect to be talked down; etc.

WALKING AWAY:

10. Know when to hold ‘em, know when to fold ‘em. If your mortgage is $50,000 more than the current value of your home and your mortgage company isn’t budging, what should you do? If you’re behind and can’t make the payments, should you pull money out of your retirement account to get out of trouble? …Only a lawyer can advise you to walk away, but there are tons of people out there with informed opinions that you should talk to. Anybody you know in real estate or finance, or a relevant nonprofit, is a good place to go for educated opinions. Just call them and tell them you want to know what they think, or what they would do. Make sure you talk to people in (or read websites relevant to) your state, since state laws matter a lot. For example, in Michigan anybody getting foreclosed on has six months to live rent-free at the home while they find another place. If you didn’t know that and just walked away with nowhere to go, it would be a huge mistake!

11. Have a long-term plan. What will you do if you walk away? Where will you go, and how much money do you need to have to pull it off? Does your credit matter in the near term? (Foreclosure hurts your credit probably worse than anything else, including bankruptcy, but if you won’t be buying/renting/leasing anytime soon, it can be a good thing to sacrifice for, say, that six months’ rent-free time to save up money!) How are you going to handle your other debts and obligations? The more you know about your long-term plans, the better a decision you can make. This is where nonprofits that will help you with budgeting and financial planning can come in really handy.

12. Plan to pay a lawyer, at least to read any documents you sign. Most attorneys will read and comment on a document for a one-time, reasonable fee of a hundred bucks or so. You should plan to pay this, because if you give up your home by signing the contract the other side’s lawyers hand you sight-unseen, well, you’re an idiot. You want to make sure the paperwork says what you understood it to say, and that there’s no possibility of negative effects coming back on you later (like a clause that says, "If we can’t sell the home for the value of the mortgage, you owe us the difference." –Yes, I’ve seen those.)

13. It’s not a high-school breakup. If you walk away, literally, without making any arrangements with your mortgage company, don’t expect that you’ll never hear about it again. You can’t just wander away from a huge debt and never have it come back to bite you in any way. I always advise people to "walk away", if they decide to, as openly and in as controlled a manner as possible; never like thieves in the night. That way, you can protect yourself as much as possible, and if there are likely future consequences, at least you can be aware of, and hopefully prepared for, them. Unfortunately, many people are ashamed of their situation and so don’t talk about it or plan it out, and this only makes it worse in the long run. Remember, the bank would bail on a bad investment too, and if your house is, due to the market or other circumstances, something that you can no longer afford, then cutting your losses is a perfectly reasonable financial decision — if you do it like a grown-up, and tie up your loose ends as much as possible.

There, I hope that’s useful. Please keep in mind that I’m probably not the person to give you specific advice, and if you put personal information in the comments I’ll delete it for your safety. I’m happy to clarify any of the above if needed, though.

PD

Okay, some almost-good news this Monday Morning: The complete (or near-complete) shutdown of mortgage workout negotiations that hit us (at least in Michigan) last Monday morning, following the Fannie/Freddie debacle over the previous weekend, appears to at least not be a shutout any more. Several clients, and one lawyer who does workouts, tell me that they’re at least being talked to again; though nobody’s made any concrete progress so far.

I’m happy about that, but the same people who are happy with me are also urging major caution about thinking the worst is over. One attorney with 30 years’ experience in finance told me that he’s “genuinely scared”. And even without the influence of last week, whatever it turns out to be, I can see where they’re right — you need to “walk on water” to get a refinance now anyway, and guess how many people in financial trouble — due to lost jobs (half a mil thanks to the “big three” alone!), illness (don’t worry, your health insurance will…oh, wait, nevermind), or the generally crappy economy — have the kind of credit and resources they need to refinance in order to save their home? Even the supar-speshall Michigan “Save The Dream” program won’t help you if your credit score is under 640! (If you don’t believe me, call them — they often won’t tell you what their requirements are, but they’ll send you to a MSHDA counselor, whose job it is to deliver the bad news. I’ve yelled at them over the credit-score requirement personally, and they tell me that it’s because the state didn’t want to have to insure those loans, and the insurer they got wouldn’t do it if anybody’s score was under 640. The federal (FHA Plus) program will accept a slightly lower score, but their requirements for credit history are stricter.)

Mortgage modifications seem like the perfect answer, as even the Administration has said — banks who can save a family’s home by lowering their interest rates or monthly payments slightly, perhaps by extending the term of the loan or reducing the loan amount if it’s way over the value of the home — should be as much winners in the deal as borrowers who don’t end up homeless, since banks typically take a huge financial hit from foreclosures (even if they don’t own the mortgage anymore, they still have to maintain and sell a home in a crappy market). But I’ve now heard from several sources I consider reliable that, with Fannie and Freddie apparently going to be held up by the government, and offering a solid 80% to banks with loans in default, the motivation for banks to do workouts may be disappearing. They may not lose 20% on the deal they make you, but even if they don’t, who’s a more reliable payer — you or Fannie/Freddie? If you were a bank, would you take 90% probably, or 80% definitely, if you were making those decisions on a massive scale?

Anyway, I just wanted to give an update to say that the “Black Monday” shutout seems to have been some kind of reaction, rather than a policy change, and WHEW thank goodness for that; but in spite of that good news, things overall do NOT look good for homeowners from where I’m at.

And now, if you don’t mind, I’m going to try to stop talking about Doom-y Work Stuff here. I freaked out a bit last week…having to spend all day telling people they’re losing their homes will wear on you a bit…and I’m not apologizing for that, because I think the current situation around here is legitimately frightening. But aside from doing my job, there’s not much I can do about it, and I hate dwelling on the negative. So, before I close this topic, I’m going to make one more post — about helpful things I know for people facing foreclosure. At least I can be a little useful. But beyond that, there’s really nothing more I can say.

Yuck.

Okay, I’ve now heard a number of reports of negotiations that still seem to be ongoing, and one of the ones that was shut down on Monday the 14th has, while not being reinstated or making actual progress, at least successfully had a conversation that didn’t sound like a total dead end. That’s still not much information to go on, but it gives me hope that this is temporary. …On the other hand, when I mentioned this to a loan officer, the reply I got was, "Maybe it is…but things will never go back to as easy as they were before last weekend."

Now, in case you don’t think that sounds too bad, consider this — Six months ago, the company I work for could get successful mortgage modifications and/or refinance opportunities for about half the people we saw. The other half were just too far gone in the process or simply couldn’t afford their house, or were the victims of unreasonable mortgage companies and lenders. As recent months have rolled on, that number has gotten lower, and lower, and lower…It’s now impossible to get refinancing in the redemption period of a mortgage, or for anyone without at least a 640 credit score, or if the value of the home has dropped more than about 10-15% below the value of the mortgage (what they call a "short sale" arrangement). To think that it’s gotten even worse, and won’t get better, is nearly as chilling to me as negotiations stopping altogether.

(Note that some of the effects of the last six months could be exacerbated by this being Michigan … but while our job rates are horrid here, there are places in the U.S. where the real-estate problems are even worse.)

Also, apologies for not having gotten through the slew of comments on the first Black Monday post. I did finish moderating them all, and if you like craziness, by all means

go give ‘em a read

. I approved everything (except obvious duplicates — sorry to anyone who was stymied by the moderation system. You don’t get moderated once you’ve been approved the first time, for what it’s worth). But I happen to think hate mail is hilarious anyway. ;) …There’s also some good information and links buried amid the rubble, too. Thanks to everyone who took the time to participate!