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Funny Business
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Someone I know well, who is on the verge of losing her home to foreclosure, has been trying to get her loan modified.
She tells me that the lender has repeatedly asked her to fudge her monthly expenses, to say she is spending less, in order to make it look like she has more money available to pay the mortgage. She says the loan officer has made it clear that the lender will only modify her loan if she claims to be spending less than she really is. For example, as a single mother raising two kids, she says the lender wants her to say she only spends $200 a month on food. "Who's going to believe that?" she asked the loan officer. Change it, she was told.
"You mean, they asked you to lie?" I asked. "Yes," she replied.
Isn't this what got us in trouble in the first place?
HOUSING POSTER BOY--THE FALLOUT
A lot of reaction to Scott Mintz's mea culpa on all that went wrong in his endeavors to invest in real estate.
First of all, Indymac got back to us about the one of Mintz's mortgages for a rental property. Indymac tells CNBC it's servicing that loan per FDIC rules and, "The FDIC loan modification program doesn't apply to investment properties. We try to be frankly firm with people, saying the program is about affordability and reducing foreclosures. It's not about undoing people's bad investment decisions. In order to operate this program, and be a viable program, you have to draw the line in the sand somewhere."
Regarding Mintz's hope that Indymac will reduce the principal on the loan to current market value, an Indymac spokesman says, "If he wants to keep property, we may make a modification, but we are not doing principal writeoffs."
READERS RANT
Mintz isn't getting any sympathy in my email Inbox.
From Richard B.: "I say screw him. If he had made millions on these properties, how much of that would he want to give away to the government or a neighbor (whom essentially would be paying for his bailout)? I took risks in high-tech companies. Lost most of it, but that is how the cookie crumbles…live and learn."
From TC: "My sister-in-law and husband, both chiropractors by the way, bought two condos in Florida in 2007 and now are crying about being underwater with them. No renters want them as they are too small, and they owe $250K each, and are praying for an Obama bailout. I sure hope they don't get one."
From Kate I.: "This story amazes me...As a former realtor, I get so angry I have to turn off CNBC when I hear them talking about the housing crisis...What a bunch of baloney. I would venture to guess as much as 40-50 percent of the foreclosures are people just like him. I know several personally who are losing 2 or 3 "investment" (i.e. get rich quick) houses...not their primary residences mind you...the ones they bought because the stupid, greedy, irresponsible lenders let them lie about income, lie about occupying the house as primary residence, and buy with no or little down payment. I sat in many, many closings where everyone around the table, including the mortgage broker, knew exactly what was going on...my fellow realtors were just as greedy, raking in the commissions and hoping to ride the gravy train for as long as it lasted...knowing it would come to a screeching halt! OK, thanks for letting me vent...my blood pressure is getting too high so better end my rant!"
I hope reader Scott is checking his blood pressure after he wrote: "LET HIM TAKE THE HIT, THE BANK TAKES A HIT, SCRUTINIZE LOAN DOCS/ APP AND SEND MORT BROKERS, BANK AND SCOTT TO JAIL OR A FINE. LET GOV BUY HOUSE AT FAIR MARKET...WHY LET THE DUFFUS' get out "scott" free. This (real estate) frenzy caused my properties to escalate 350% in four years, yet I am getting by without whining...AND market values are now falling BUT taxes/ insurance are still based on INFLATED values."
From Gary W.: "No, he should not be bailed out! He and all others who speculated on ridiculous appreciating real estate, and invested their money there, are actually worse than other Americans who invested in the stock market...I have been a long time investor who has lost 60% of my investment funds and the same in my 401k. Do you think anyone is going to bail me out ---- No, and they shouldn't! I took the risk and will have to suffer the consequence."
From Carlos: "I pay my bills and my mortgage. My family and I did without while people like 'Poster Boy' were living it up...Stop blaming everybody for your troubles and move on."
Mike H. says he's a 35-year veteran of the mortgage biz:
"No one should make any effort to do a work -out on a loan to a non-owner occupant. It was a dumb investment -- homes as rentals usually are -- everyone watched 'Flip this House' and flipped their lids. Just foreclose and resell those houses to nice people who will live in 'em with their kids and dogs. The sad fact is, as an old S&L executive once told me during the last crisis, 'Workouts (modifications) don't work.' We might be able to help some people and we should at least try -- that's not the solution...there are a lot of good folks out there who would love to buy these houses -- lets help them, too."
David C. says bankruptcy could save Mintz: "A bankruptcy judge can order a bank to do a cramdown on investor houses. If he can't make the payments, and the houses are upside down and he wants to keep them, file a BK and the houses will be reduced to market value...A BK judge can't do this with owner occupied houses, only investor house. Barney Frank is trying to get residence BK cramdown, but lots of resistance...I have 13 rental houses and 10 of them are upside down. I have perfect credit and have never missed a payment. I value my credit, so I pay my mortgages every month and hope for the best."
From Chris R.: "It seems to me that since they are rental properties and he borrowed more money against them to rehab another, he would be considered an investor or businessman. Even before the current economic crisis, there was always a chance that starting a business would result in failure...If this crisis did not occur, would he be willing to share with the taxpayers a larger portion of his profits (larger than his tax bracket). I would think not. He claims he was duped into borrowing more but as an educated adult, is it not his responsibility to know what he is getting into and signing his name to?"
From Rob D.: "We watched for years people (who) thought they couldn't fail (while) the time-tested wisdom of patience and prudence was scoffed at. I'm not trying to be heartless, but grow up, accept responsibility and take the tough action that needs to be taken - in your case, bankruptcy. This is America, a land of opportunity, which means success and failure can be yours. Excessive risk is not for me, but it was for him. Can we please grow up and realize that bad things happen and that doesn't mean that we then immediately start looking for someone or something to dump the consequences on?"
Michael D.: "Sadly, you have to let him fail. Without consequences he'd be rewarded for taking excessive risks and be inclined to start the whole process over again and come back for another bailout."
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