Facebook
Fark
Digg
Reddit
Stumble
Monday, June 8, 2009 | 2 a.m.
Sun Archives
- Report: Nevada's 31 percent home price drop tops nation (5-28-2009)
- Las Vegas banks hit hard by bad loans (4-10-2009)
- Housing collapse evident in falling tax appraisal values (4-6-2009)
- Report: 58.2 percent of Las Vegas homes have negative equity (3-4-2009)
- How Obama's mortgage relief plan pencils out (2-21-2009)
- Nevada's foreclosure rate tops nation once again (2-12-2009)
- Analysts disagree on timing of real estate turnaround (2-11-2009)
- Home sales slow as prices continue to tumble (2-10-2009)
Reader poll
Back in 2000, long before subprime lending to credit-risky homebuyers overheated the housing market, Rosemary Murphy used her financial good standing to pay for a house the old-fashioned way.
There was no funny financing or gimmicks. No adjustable rates.
Safely employed by the Clark County School District, she secured a traditional, 30-year, fixed-rate mortgage.
She’s now in trouble. And she’s a face of the next wave of foreclosures: homeowners who thought they were doing everything right but have still been overrun by the recession.
Murphy, 55, left her job in 2004 and, profiting from the real estate boom, refinanced her home with another conventional loan after its value skyrocketed to $800,000. She used the newfound money to launch her own mortgage brokerage business in Texas, where she and her husband owned land.
But the recession — triggered by homeowners with subprime loans who were unable to adjust to rising mortgage interest rates — is expanding its reach. Murphy’s mortgage business collapsed last summer, and she has fallen behind on her $3,960 monthly payments.
The bank is warning her that, come August, the foreclosure wheels will start turning. Last week it turned down her attempts to modify her loan.
“I am so willing to scratch and give them every penny I have to stay in my home, but they won’t work with me,” she said.
Economists expect unemployment to keep climbing until mid-2010, so prime-mortgage foreclosures will likely worsen even as the number of foreclosures involving subprime mortgages is dropping.
In Las Vegas, the number of prime mortgages 90 days delinquent is up almost 4 percent compared with last year, according to First American CoreLogic. Nevada had an increase of more than 3 percentage points in the rate of conventional-loan foreclosures, second only to Florida’s growing rate of prime mortgage foreclosures.
Debbie Kohl, housing coordinator for the Henderson office of Auriton Solutions, said the credit counseling agency is increasingly getting calls from homeowners like Murphy.
“For a while every call was: ‘I have an adjustable-rate mortgage that will reset soon,’ ” Kohl said. “We’re not hearing that as often now.”
Other agencies report the same trend and say that although prime mortgages have always been in the foreclosure mix, the percentage has increased. Job loss is the most common impetus. And it’s not limited to a total loss of employment.
Many are struggling with payments that were once reasonable for their income but are a hardship now because they’re no longer getting overtime hours, are working 30 hours instead of 40 or have had some sort of furlough imposed, Kohl said.
“We’re hearing this from all walks of life: plumbers, electricians, dentists,” she said. “I talked with a dentist recently who said nobody’s coming in anymore unless it’s an emergency.”
In a healthy economy, a homeowner who suffered a significant loss of income would sell the house and become a renter, but in the current market there aren’t buyers at the prices owners need to get to pay off their loans. So, many are seeking loan modifications, in which the bank lowers the interest rates and in turn the monthly payments.
Some, though, are finding it’s hard to get the bank to budge because any modification is predicated on income.
“You have to be employed with a certain amount of cash flow. Otherwise you’re dead in the water,” said Jaime Lopez of Neighborhood Housing Services of Southern Nevada.
That’s the problem confronting Murphy. She has a limited income working as a substitute teacher but expects to be hired full time in the fall. The banks told her that’s not good enough, she said.
“They said I don’t earn enough money to get a modification. That’s the stupidest thing I ever heard. That’s why you need a loan modification,” she said.
The government committed to spending $75 billion to encourage lenders to cut payments for those in trouble, but so far the number of those helped is small and experts question whether the government can spend enough to stave off foreclosures.
Kohl said she’s been having some success getting people like Murphy a forbearance plan, in which the bank agrees to give the owner a chance to catch up by not requiring payments for a few months. But only some banks are doing that, and homeowners are struggling to find another source of income in that time frame.
Some holders of conventional mortgages are so underwater that they are walking away.
“Banks make business decisions, and so do individuals. They’re coming to the conclusion that it’s worth the hit to their credit to give the house back,” said Ian Hirsh of Fortress Credit Services in Las Vegas.
Michael Joe of the Legal Aid Center of Southern Nevada said last week he talked with a homeowner who said he could rent a house across the street exactly like the one he owns for $1,000 a month less than his mortgage payments — leading him to wonder whether it’s worth hanging onto the house.
A foreclosure will affect your credit for seven years, but Hirsch said as people feel trapped in their houses they are becoming less and less concerned with credit ratings.
A foreclosure hit on a credit report in 2008 or 2009 “won’t be all that uncommon and certainly not the end of the world for their credit,” he said. “In a couple of years it will almost be something that is a satisfactory explanation in and of itself: What happened to their credit? Oh, they owned a house in Las Vegas.”
It is so clear that with the Fed loaning money to banks at 0%, with direct bailout money to cover reserve calls, with tax write offs when they buy securities and no taxes after they hold to sell banks are making money on the backs of the down and out mortgage holders.
Business Week report in the June 8th issue that JPMorgan Chase bought Washington Mutual for just $1.9 billion and is looking to pocket $29,1 billion over the life of the loans.
On top of the failure of Congress to pass the Freddie and Fannie regulations back in 2005 - all of the Congressional foreclosure laws since the summer of 2008, have only strengthen the banks in their battle with homeowners
Banks are setting the market price of homes well below their realistic value with fire sales and then will refuse you a refi because the your home is underwater.
Well who set the underwater house price - the bank.
The banks come out ahead by writing off on taxes, bailout money and with 0% interest they can holding the best units for the uptick.
This will not end without government action - but it will not come because Obama needed to keep the banks liquid.
Homeowners are out of luck
Today (June 8) on Face to Face with Jon Ralston, we're talking about a new option for struggling homeowners: a law that allows them to enter into mediations with their lenders. We're talking with Assembly Speaker Barbara Buckley, Nevada Supreme Court Chief Justice James Hardesty and Nevada Bankers Association President Bill Uffelman. That's at 5:30pm, 6:30pm and 8:00pm on Las Vegas ONE, Cox Cable Channel 19.
mediation, is about #1-looking forward, not putting yourself in the situation and #2-a fine law team for when it does happen
We need to organize and march on the banks in order to allow people to stay in their houses. We should totally use methods to pressure banks. The only way we could do this is for people to band together in associations. http://AntiForeclosureArmy.com
It is hard to feel bad for someone who missed a $4000 dollar mortgage payment when most of us get on on less than $4000 a month for our total expenses.
Also, prime or not, maybe she should have not refinanced.
Honestly, it is getting harder and harder to feel "bad" for folks caught up in these fact patterns.
The woman took money and lost it. She borrowed money to start a business that failed. Why is that anyone's fault but her own. She had a home she could afford but borrowed against it and failed. This is not a national problem nor our problem. This is her problem. It's time to give up the house and start over. That is what happens when your business fails. Don't send me the bill.
Nice, future you got the tiger by the tail.
Banks are not your friend; they want you to fail, as I wrote months ago in one of my posts.
"Safely employed by the Clark County School District, she secured a traditional, 30-year, fixed-rate mortgage."
"and she has fallen behind on her $3,960 monthly payments."
Scratching my head - Am I Missing something?
"...profiting from the real estate boom, refinanced her home with another conventional loan after its value skyrocketed to $800,000. She used the newfound money..."
Newfound money? That was not money to be found. That was a risky transaction based on the foolish belief that home prices would not experience a correction and the economy would not falter. She took a risk and lost. Just like I don't get to renegotiate my losses at the craps tables or sports book she is not owed the opportunity to renegotiate her mortgage investment risks.
people who buy a home to live in, raise a family in, and then lose it because of a job loss or medical bills...i feel bad for them.
people that bought homes to use it as some kind of atm machine...no, i don't feel sorry for them at all.
also...the words "safely" and "employed" should never be used together.
there are hundreds of thousands of americans, many in white collar jobs that thought they were "safely employed" that are at home right now on monster.com looking for a job.
just wait until city center gets done. where are those construction workers going to find jobs? echelon? nope. fountainblew? nope.
they'll have to leave town, and that's going to create a big supply of rental homes, dropping rent prices down and then the house that used to rent for $1400 will now be $1100 and the owner of that home that was getting a $200 / month cash flow will now be falling behind on their payments and eventually that home is going back to the bank.
until the national economy turns around, vegas is kinda screwed.
"and she has fallen behind on her $3,960 monthly payments."
Jesus God, what did she buy? For that money, I could own 4 nice homes like mine with a view of the Strip and the entire valley. Including taxes. But no, that would be crazy. No, she fell into the Public loafer mentality, because she figured she would never be laid off, and has a nice pension coming, so she could spend like the Donald today. Sorry, Honey, go back home to Texas, where Stupid (aka GWB) was invented...
yeesh. I'm safely employed by the school district too and I secured a fixed rate on the house I'm currently in.
I wonder why the same thing didn't happen to me.
dumb luck?
Or maybe it is because I kept my job with the district and just kept plugging along and making payments on the modest house I could afford and didn't get sidetracked on some wild fantasy of making millions in the real estate market when things were going bonkers even though anyone with an ounce of common sense or who isn't totally blinded by greed could clearly see that it wasn't susatinable and something had to give.
or maybe I was just very fortunate and she was unlucky.
I laugh every time I read one of these supposed "sob stories." These reporters always think they've found a sympathetic person to build the story around, but then the deeper you read, the information starts to get sketchy.
In this case, the woman refi'd the "paper equity" in her home to start her own mortgage broker business. Yeah, smart move, honey.
In most stories, particularly in the New York Times, the reporter casually slips into the story something to this effect: the couple refi'd their home once or twice "to pay off some credit cards bills" and because of some unspecified "medical problems."
Ding! Ding! Ding! That's when the red flag in my mind goes up. Refi-ing to "pay off some credit card bills" is simply borrowing irresponsibily to pay off bills that were almost certainly run up irresponsibly. Where are the reporters' follow-up questions about "paying off some bills" or "the medical problems" or even an unexplained change in "job status" that is often cited as well.
Note to reporters: these stories do not make your subjects sympathetic. They make them look like the financial amateurs they are, and only increase public outrage at attempts to bail them out with taxpayer dollars.
idiots. yes, lets take a secured loan, to pay off an unsecured loan. hmmm. what are people thinking. people need to learn to manage their money better.
This article is spot on in regards to banks getting zero(%0) percent financing from The Fed. A lot of you are sick of hearing the sob stories. So so funny" you dumb @$$es don't seem to realize your savings is being inflated away.
That's right all you responsible savers. So smart you think you are, too stupid to see the silent tax The Fed is imposing on you.
The sob story will come to you when you realize you've scrimped and saved your entire lives only to see the Fed rob the value of your nest egg.
The problem is that The Fed is destroying our country for the benefit of the Banksters on Wall Street you too will be a victim of The Feds silent tax.
Your frustration should be placed elsewhere.
jaesun, idiots they are.
This country is taking a loan to payoff another loan and will need another loan to pay off those loans.
You're right that people need to learn to manage their money better. Those people being the United States of America.
guess she better use her money and buy a grocery card and hang out at the park - should have lived a modest life style - hey I live in a manufactured home (trailer) - maybe she can move into one of those - or go to a casino and see if she hits a slot
I don't know what to say. Good Luck.
The problem is not her "individual" situation. You can place the problems she's having with the bank into other individual scenarios. I lost my job, scrambled to get another, and am now underemployed. I didn't refinance, didn't buy a business, didn't make a financial mistake. It's the economy, stupid. The bank is using the same game plan on all borrowers. Refuse to modify, foreclose and sell the house for 100K less than your loan amount to someone else. Okay, you were all perfect little financial managers...but now squatters moved into the foreclosed homes in your neighborhood, crime goes up, and the next generation of children who lost their homes and now live in a tent are traumatized (per current studies). They now need counseling as they age. Their parents can no longer shop in your stores, purchase your parts, or add to the tax base. Prepare to pay one way or the other. One way preserves families and one makes you feel righteous in the short term.
Not all being foreclosed are folks that "deserve it". I've read MANY stories - they refi'ed :withdrew 25K and bought a car, refi'ed - withdrew $x for trip , kids' school, etc , Now has no equity and note called - they want a bailout. I didn't get the car,take the trip etc. Most recent I saw on Tv with congressman saying ... how is she supposed to come up with the money ? ... For the past 5 years she has withdrawn $20,000 of equity per year and refi'ed . I'm sorry but not my problem. I didn't have any of that $100,000 PRIOR to her problem, why does she think WE now owe HER ?
NYT from a few days ago ...
http://reason.com/blog/printer/133925.ht...
This person took a gamble and lost. Such is life, and there are consequences.
That being said, things do happen, and it upsets me that the banks got bailed out by obama and bush, but they are still trying to collect on all the loans out there.
Also, wouldnt it be more efficient for them to kick down the payment, tack it to the end of the loan, and have a less performing loan than wind up with a half destroyed house after they kick the owner out and vandals take it over?
Short sightedness I think.
Check out http://obamamortgage2009.blogspot.com or obamamortgage2009.blogspot.com There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 - to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.