Stop and Avoid Foreclosure With a Well Planned Real Estate Short Sale
It is now clear that many people outside of the traditional subprime borrower are facing the loss of their home through foreclosure. In 2007 the implication was that the subprime borrower was irresponsible and for the most part solely to blame for the epidemic of delinquency. This has proven to be false. In society we are always looking for a scapegoat. That always makes us feel better and separates us from the cause.
Today we are facing realty. Many people, and the majority of our customers, are not in the subprime category and they didn’t buy a home with the intentions of walking away from it. The majority of people put as much as 25% down from savings or from the sales proceeds from another home that they owned for years. How did all of these people get pulled into the epidemic?
It’s really quite simple. You can sum Linden up with the word “Greed”. Wall Street was greedy and they continued to put out loan programs that allowed people to push the limit of traditional home affordability. The borrowers wanted it as well. For every homeowner that is stuck in a mortgage that signed up for an Alt-A Loan Program or any fancy Option Arm or Interest Only Program it began with greed. Where are we now?
Let’s first be clear and honest with ourselves. Alt-A and Subprime etc loan programs were not created yesterday. Wall Street is certainly to blame for the evisoration of the lending guidelines accompanied with the abundance of 100% LTV programs. However, the fancy loan programs have been around for years but the older versions had guidelines, otherwise terms thresholds, governing loan eligibility.
For example: In 1988 I purchased my second home with a 75% loan-to-value 3 year adjustable rate program with a Stated Income feature. This meant that I have to put down 25% in the form of a qualified down payment and my income had to correlate to others in my employment field. It had to be my money, gainful employment was required, etc. It was all very sensible. We even had option arms in the late 80’s. They were great as the loan program of last resort. My nickname the Option Arm at that time was “The Trashcan”. It took a lot of time to sell one of these in the 80’s. Realtors looked down on you if you even mentioned it to their client. You really had to wait until the client brought it up or the realtor pushed you for whatever was available. It is simply appalling that they became such a hit during the recent frenzy in real estate. Maybe the realtors pretended not to remember the negatively amortizing loan programs. Maybe they just looked the other way. I will let you answer that question.
The best way to sum this entire episode up is with “Greed”. If you are in trouble with a home, whether it is a primary residence or an investment, you are “Guilty” of being greedy. The lender is not responsible for your well being. If you lose your job or the economy turns south you still owe them the money. The realtor is not responsible for you either. If you were too stupid to question their mantras like, “It’s different this time”, or “You better act now or you will be priced out of the market”, or “you better put a triple whammy auto escalator into your contract or you may not get the property”. Does anybody remember this or are we all so convinced that we are ritcheous and victims of the economy or someone else’s actions? It is frightening to read the papers and see all the distressed homeowners with an attitude of entitlement. It’s everybody else’s fault and I should be let off the hook.
Let’s talk a bit more about the word “entitlement”. I personally don’t like this word. People that show up for seminars or meetings with their lenders with a presumptuous attitude that the lender is going to roll out the red carpet and fix everything are dead wrong. Let me tell you what is going to happen. Your lender is not going to forgive your debt. They are going to listen to your pleas and if you are lucky they may restructure your mortgage by a small amount to assist you with affordability. There is a high probability that your expectations during the process of negotiation will not be met. You will become frustrated and very angry. In the end you legally owe the money to your lender and they have the absolute right to literally beat the hell out of you in any manner they see fit. This means that they will harass you by phone at work and at home whenever they please. They will send out nice letters and then nasty ones. They will sick the foreclosure attorneys on you and you will get letters that you don’t understand. You will be scared and generally bothered all the time. You lender is going to exact a toll on you because they can. How does it feel being a desperate beggar? I am sure it sucks!
How many more Loan Modifications and government programs that fail is it going to take for you to become realistic and help yourself? Maybe the new administration will stroke a couple trillion dollars out to get everybody out of their personal real estate hell. If you think this will happen please stop reading this blog and never return to this site again. If you are in this category you are a “loser”.
The solution is for you to understand that this is your problem. You can both be part of the solution and get over the expectation of “entitlement” or you can continue to waffle and dissipate all your assets and end up in foreclosure. Ignorance and the attitude or expectation of entitlement sort of bother me if you haven’t gotten my drift. However, to be fair, I want to give you the context of entitlement with a recent example so you can be the judge.
A lady bought a house two years ago in Virginia. She paid 500K for the house. It supposedly was her dream home. She and her husband make 160K per year and they can afford the payments just fine. Recently a young man that just finished college bought a home two doors down for her. He only paid 253K for his home. This made the lady mad. During our conversation she referred to the young man as a “Punk” just out of college. To me that sounds a bit harsh. The “Punk”, just got a better deal then you, was my thought. The lady was disgusted that her shack was only worth 250K. She wanted to hire our firm to get the lender to forgive the 250K she was underwater and let her keep her house. This is “entitlement”. I told her pompousness that it doesn’t work quite that way.
The only way this individual can essentially have her cake and eat it to is with a Real Estate Short Sale. Oh my she said, “I would have to leave my home”. She just wanted the lenders to forgive the residual mortgage debt. When I had had just about enough of the conversation I abruptly created an exit with a guarantee. I told her I will guarantee her two things. First the government will save the free markets and she is on her own. Secondly, I said, “you owe the mortgage debt to your lender until you don’t”. She didn’t like the sound of either of my statements. This is entitlement. Doesn’t it make you proud to be an American?
Where is the solution for the decent human beings that are truly proud Americans? The solution is in the only comprehensive “Free Market” option…The Real Estate Short Sale. With a Short Sale you can effectively have your cake and eat it too. It is also the most responsible action you can take by providing your lender a solution in this terrible housing crisis. The downside of winning is that you will have to move from your present home. The rewards are high so you can rent for a year or two and you will be just fine. In this market that is probably the best for you anyway.
At the end of the day the responsible people will win and effectively mitigate and minimize the adverse affects of the housing crisis on their families. The soul searchers of entitlement will get crushed. Blogging from the front line of the housing crisis.
G Hunter
Author of Blogging from the Front Line of the housing crisis.
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