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Some Good News for Homeowners

posted by Angie Littwin

JPMorgan Chase and Citigroup have announced a weeks-long moratorium on foreclosures while they await the release of the Obama administration's forthcoming plan to deal with the issue. J.P. Morgan said its moratorium will apply to loans it owns and services, while Citi is including its own loans as well as those on which it has reached agreements with the relevant investors. For both banks, this is an expansion on similar past efforts. It remains to be seen exactly how many troubled home loans this will cover.


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It's good news for homedebtors, not homeowners. Homedebtors won't suddenly improve their incomes in 90 days unless a handout is coming - and that handout will come from the picked pockets of homeowners (and renters).

Also not good news for communities trying to find someone to do snow removal, cut the grass, and secure the property.

Foreclosure freezes are a wholly untargeted approach. There are lots of people who are seeing the economic writing on the wall and making the tough decision to give up their houses. A formal 'deed in lieu' to voluntarily transfer the property is not something that benefits them personally. And even if they wanted to do it, good luck finding someone at the mortgage company or servicer - if you know who they are, and can find them - to take the keys and do the paperwork. Obviously, in the midst of economic turmoil and moving your family, working on a voluntary real estate transfer to your lender is not going to high on your to-do list.

The advantage of the bankruptcy mortgage modification approach is that it lets the homeowners who want to fight for their property, fight. And it doesn't stop the process of taking possession and securing property where the owners have decided to move on. A "freeze" also delays the process of getting those properties into the hands of people who can do something productive with it.

Abandoned properties leave neighborhood problems with rats, mosquitoes, gangs and other squaters, frozen pipes, fraudulent rental scams, weather degrading the property, and on and on. This freeze may have more to do with mortgage companies avoiding local housing courts than anything else. Meanwhile, everybody in the neighborhood is facing additional losses in value to their residence because of the condition of the abandoned and unmaintained properties.

The situation today may require a freeze - but that is more of sign of how bad things are, and how long it has taken to adequately frame a response to the foreclosure crisis. It doesn't make foreclosure freezes a good solution for anyone to anything.

We aren't going to be able to save everyone. The question is how to save the saveable, maintain public health and order, and do what we can to keep the valuation damage from spreading. The terrible employment situation means that many people could not afford even the on-going expenses of the houses they bought at the height of the bubble even if they had no mortgage payment. Very sad, but that is the hard reality we are facing.

If nothing else, I would think that three weeks would be enough time for a homeowner - or home "debtor" as was anonymously posted - to be able to bring any concerns they may have about a pending foreclosure action to either competent private legal counsel or to their state legal aid chapter. Knowing what I know now, regardless of a homeOWNER's status with their loan, if I were facing a foreclosure in the next few weeks, in filing for a TRO the first two things that I would ask for is proof that 1.)the foreclosing entity has standing to foreclose and 2.)that the foreclosing entity has the original note in their possession.

There are far more things potentially wrong in a foreclosure than a homeowner "simply" falling behind in their payments Anon... This "Crisis" most definitely is NOT 100% the fault of homeowners not being able to afford their homes.

@AMC: if the homeowner / homedebtor thinks he is going to lose the house, but can stay on for a month or two with no additional payment because of a foreclosure moratorium, anyone in their right mind would do so. Enjoy the house a bit longer, don't pay rent somewhere else, don't squeeze in with relatives, etc. And maybe further help is coming with the new plan that is due.

And so the home will not be abandoned, rats will not be running around, pipes will not freeze, and the grateful if somewhat sheepish occupant will probably mow the grass when it starts growing again.

Your concerns about abandonment are overblown. It truly makes no sense to have empty houses when there are people who need them.

This is bad news for homeowners and worse news for potential buyers. Young families (like mine) watched the bubble grow and were smart enough to sit it out. Now we need things to get back to normal so we can start planning for the future. That means this bubble nees to finish popping, and fast.

Postponing the inevitable a few months longer only extends the pain. Nothing is going to save the people who can't afford their homes (most of whom had no business buying in the first place).

Which is why it is 100% their fault. Sorry Mike, but that's reality.

artichoke -

I have no problem with people staying in a house until they are told to leave. During my career, I have discussed people staying in a house until told to leave with clients on all sides of the issue - debtors, creditors, and trustees. It can actually beneficial to both parties if the former owners don't strip or damage the property - particularly in reference to insurance costs. I haven't dealt with the details of the insurance issue for a while, but if I recall correctly, property that has been vacant for a year is almost uninsurable, and the clock starts when the owner/former owner vacates the property.

But the fact remains that many people abandon houses after default for any number of reasons - job loss/change, domestic violence, not understanding that it may be to their financial advantage to stay, not being able to handle the lack of long term stability, wanting continuity in the school situations for their children, having problems at the house they can't afford to fix, collection people threatened them and they believed the threats, just wanting "it" to be over, etc. It happens more than you might think.

A foreclosure freeze doesn't deal with any of those situations, it just delays getting a responsible party taking possession of the property.

I have a whole separate problem with mortgage companies and how they dodge the legal responsibilities of ownership - but that has nothing to do with moratoriums on foreclosures. That is during the post-foreclosure period.

From an interesting article in The Atlantic:


When work disappears, city populations don’t always decline as fast as you might expect. Detroit, astonishingly, is still the 11th-largest city in the U.S. “If you no longer can sell your property, how can you move elsewhere?” said Robin Boyle, an urban-planning professor at Wayne State University, in a December Associated Press article. But then he answered his own question: “Some people just switch out the lights and leave—property values have gone so low, walking away is no longer such a difficult option.”

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