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Abigail Field: HousingWire Propaganda Part II – The Irresponsible Borrower Myth, Harry & Louise Style

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By Abigail Field, a lawyer and writer. Cross posted from Reality Check

Monday I did an analysis of a study HousingWire reported as showing that profligate borrowers were the reason many 2009 mortgage modifications failed. I analyzed the reported data to show the 2009 mods left borrowers insolvent, and said it’s not surprising that mods that leave borrowers insolvent fail. In the ‘article’, Tom Showalter rejected the idea that mod terms mattered. Instead he claimed the borrowers’ “lifestyles” explained who defaulted and who didn’t.

But here’s the thing. As I explained Monday, the key “lifestyle” choice was which debt to default on: when insolvent, did the borrower pay Peter (the mortgage servicer) or pay Paul (store/credit card debt)? Indeed, the study was a marketing tool trying to sell the ability of a matrix invented by Veritas to identify which potential mod candidates would pay Peter, and which Paul, so the banks could modify loans only for the people who picked Peter. That focus makes the invocation of the irresponsible borrower myth in the article particularly egregious–both borrowers are trying to be responsible in the face of insolvency.

The Morality Tale

Showalter pushes the ‘it’s not the mod terms, it’s the bad borrower’ idea with far more than the “Living Large” headline. He personifies the data by inventing two couples, pitched as archetypes of good and evil, probably hoping to copy the policy-killing success of Harry and Louise.

Showalter’s heroes are subtype G, the 3% of the sample that redefaulted on their mods “only” 26% of the time. He calls them Lois and Eddie, a small town Midwestern couple who’ve been married 20 years, have kids in the local school, work at the mill, and are deeply “entrenched” in their community. They’re not underwater on average, holding 9% equity in their houses. And they’ll do anything to hold onto their houses, because

For Lois and Eddie, their lifestyle–and their values–demand that they save their home. They derive their identity and their purpose from their community. Losing their home would mean losing membership in their community, which is a big part of what makes Lois and Eddie the people they are. A foreclosure would cause Lois and Eddie a great loss-of-face among friends, co-workers and family. Their employers might take note as well.

No wonder they choose to pay Peter over Paul, and default on their credit cards or other debts instead! (Incidentally, surely the mods are objectively inadequate when this archetype of goodness still redefaults a quarter of the time even while they let their revolving debt go delinquent.)

Later in the piece we also learn that Lois and Eddie are:

low income borrowers who are responsible consumers of debt; they very likely own a modest, below median-priced home, view their mortgage as their primary financial obligation and pay limited interest in other forms of debt, such as credit card and retail card. Property values in their neighborhood have been more stable and not subject to wild speculation and tremendous price increases or decreases.”

So in analysis of mortgage related data we know that someone’s had the same employer for 15 years, has been married for 20, has kids in the school and 9% equity, but we don’t know if their house is below median price? They are responsible consumers of debt because they let their credit and retail cards go delinquent to pay their mortgage? They are responsible borrowers because the bubble didn’t hit their neighborhood?

Without the underlying data it’s hard to be precise about how much Showalter is inventing and what he can footnote, but it’s important to notice that his profile contains factors that aren’t driven by Lois and Eddie, such as the stability of the house prices, and that others, like the responsible nature of defaulting on revolving debt, are a matter of perspective.

Contrast wholesome Lois and Eddie with the can’t-be-helped Vicky and Dave. Vicky and Dave’s first offense is that they are young strivers:

Vicky and Dave are a 20-something, newly married couple, who bought a home in a rapidly developing metro-suburban community where they live largely anonymously, barely knowing the names of their neighbors. They have no children, few friends locally, and no family nearby. They have been with their respective employers less than five years each and live many miles from work, with no coworkers in the neighborhood.

Ok. So they’re newly married, no kids, have relatively new employers. So what? They’re young. More; conventionally we want people to get married before they have kids. If they’re college graduates, maybe it’s their first job after graduating. (And maybe they have student loans too.) If they skipped college, child-labor laws would’ve stopped them from having 15 year work histories with the same employers anyway. Living far from their childhood home? Well, they probably went where the jobs are, a brave decision that economists generally want more Americans to make.

Now, why would they live so far from work? Well, as a young couple, they’re surely at the bottom of the house-buying food chain, and homes with convenient commutes cost more. No friends and coworkers in the area? What’s the data is behind those statements? Still, perhaps Vicky and Dave spend all their time working and commuting. So many of us do, after all. So far nothing much separates Vicky and Dave from the strivers we used to idealize except ominous spin.

But Showalter includes another couple sentences about Vicki and Dave, damning sentences at first glance:

They are more aggressive borrowers with more expensive automobiles bought with borrowed money. They support significantly higher revolving balances and have a penchant to add to their credit portfolio, especially their revolving debt.”

The context to remember is this: regardless of what Vicky and Dave’s accounts are like, Lois and Eddie are insolvent after a mod too. What makes Lois and Eddie special to the bank frame of mind is that they pay the mortgage first and let the other bills slide.

Beyond that, when you commute a long way, it’s important to have a reliable, reasonably comfortable car. What does “more expensive” mean, anyway? A 2008 Ford Taurus or a Lexus? Showalter doesn’t say. Buying a car on borrowed money? Well, that’s how most people do it, and when they do, there’s a lender supposedly assessing their ability to repay the loan.

As to “a penchant to add to their credit portfolio,” I wonder what those credit lines are. How many are store cards like HomeDepot or Lowes, which let you buy 3, 6, 9 or even 12 months same as cash if you’re spending $300 at once? Either is an unsurprising card for young, striving new homeowners. They’re more likely to be DIY types, right? Are the other new lines for stores that sell couches, beds, washing machines or other big-ticket items a young couple in their first house need? Those retailers do time-limited same-as-cash deals too.

In short, I wonder whether the couple is “living large” in the welfare queen way it’s intended, or simply trying to realize the American dream on as affordable terms possible, given the decline in real wages? Showalter doesn’t say.

Later we learn that Vicky and Dave’s cohort:

is composed of borrowers who in the recent past have been very aggressive borrowers across a broad spectrum of debt, well beyond mortgage. [again, what does that mean, specifically?] However they are beginning to fall behind in their debt servicing and are suffering eroding credit and declining cash to service their debt. [Declining cash? Did someone lose a job?]

And then there’s this:

[Vicky and Dave's cohort's] Property values [ ] have incurred more depreciation, with many properties now presenting negative equity. This may account for a portion of this borrower’s recent debt servicing distress, since the borrower is no longer able to harvest home equity to support aggressive consumption habits.

What’s the data point for saying Vicky and Dave were using their equity like a piggy bank? It’s purely a speculative comment–”this MAY account”. I’d like to know what percentage of Vicky and Daves have home equity lines? What percentage of those people were constantly drawing them down before experiencing their current debt servicing problems? How do those numbers compare to the Lois and Eddies? These are not idle questions since negative equity could have a very different impact on Vicky and Dave’s “lifestyle” (i.e. cash allocation decisions).

Perhaps being young and transplants, Vicky and Dave are simply more able to be economically rational, and when forced to choose between the bills, see solving their revolving credit problems as more sensible than paying on a deeply underwater mortgage. That’s particularly true since Vicky and Dave belong to the cohort with the highest negative equity, owing 128% of their home’s value.

But economic rationality in the face of post-mod insolvency is not an acceptable way to understand the situation. Showalter explains:

Here’s the question: Will Lois and Eddie respond similarly to Vicky and Dave, given a bout of mortgage distress? Hardly. That’s the point. And, the other point: The terms of the loan modification are highly unlikely to uproot the lifestyle and financial priorities of Lois and Eddie or of Vicky and Dave. Lifestyle differences trump loan modification terms and will do so all day long. Loan modification terms cannot cause Vicky and Dave to become Lois and Eddie any more than they can cause Lois and Eddie to behave like Vicky and Dave.”

Really? The loan mod terms don’t matter? What if the terms of the loan modification left Vicky and Dave and Lois and Eddie both solvent? I’ll bet both couples pay all their bills at that point. And as I noted Monday, if the bankers (and their allies in D.C., including President Obama) hadn’t denied homeowners the right to restructure their mortgages in bankruptcy, the borrowers would in fact be solvent post-mod. That’s the whole point of the bankruptcy process.

 

 

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28 comments

  1. ambrit

    Friends;
    Another dimension of this sad tale is that, with increasing chain of title issues cropping up in the mortgage field, deferring payments into a potentially unownable property is the most rational of decisions. Also, with the younger cohort, if encumbered with student loan debt, since it is non dischargable in bankruptcy, paying it down rather than dischargable mortgage debt is another rational decision. Mz Field is right, the conformist press is promoting a non rational set of decisions.

  2. nonclassical

    ….who didn’t take notice when bushitters allowed credit card industry lobbyists
    (2004) to re-write bankruptcy laws…general sentiment in our house was, “Millions of Americans are going to go bankrupt..”

    Discovering that FBI 2003 was onto mortgage industry-MERS, but taken off the case (bushitters again) while SEC “risk management” was reduced to ONE person
    oversight, should tell all what was going on..

    ENRON was canary…first bushitter himself said, “It’s just the free market working itself out”…then, around a year later, ENRON in ruins, bushitter himself said, “We couldn’t have known..”

    But, within another year, SEC admitted, “We knew what was going on all along”..

    What’s true?

    Challenge bushitter sycophants to “follow the $$$$” to SHOW where it went, how much “it” takes to destroy U.S. $6.5 trillion per year economy, and when this was perpetrated. No answer-they revert to this sort of bushit..

    2000, “derivatives” are said to have amounted to under $2 trillion, but I’ve seen stats all the way to 30 trillion…(Yves may know better)..but by 2007, “derivatives” totaled over $600 trillion:

    http://www.nextnewdeal.net/what-congress-did-not-want-you-read-robert-johnsons-testimony-otc-derivative-market

    http://www.nextnewdeal.net/wp-content/uploads/2009/10/raj-revised-testimony1.pdf

    follow the $$$$-has bushbama done accountability??..noooo….and here’s WikiLeaks on “accountability”:

    http://jonathanturley.org/2010/12/02/wikileaks-obama-administration-secretly-worked-to-prevent-prosecution-of-war-crimes-by-the-bush-administration/

    1. JEHR

      Thank you, nonclassical, for those links. I’ve just finished reading the one about Rob Johnson’s testimony and I can see why the Investigating Committee in Congress (in 2009) cut his testimony short so that he had to hand it in as a written document. It should have been front-page news in every paper in 2009!!

      It is absolutely riveting testimony! It answers lots of my questions about why some people believe that the TBTF banks are really insolvent, about why only the SEC handles fraudulent derivatives as civil cases rather than treating them as criminal cases and about the loopholes in laws on the books such as the one forbidding voiding of CDS!! It is important to read the Appendices too.

      It is all so amazing and debilitating when we really wish for the future stability of the financial system and not the fear of future crises.

      Johnson uses a wonderful metaphor for the derivative system as a earthquake fault line building up to disaster.

      Everyone should read his testimony here: http://www.nextnewdeal.net/sites/default/files/wp-content/uploads/2009/10/raj-revised-testimony1.pdf

  3. LowRent Trump

    I feel like I’ve spent my entire adult life (for the last 30 years anyway) vacillating between these two archetypes. I’m sure I’m not alone or extraordinary.

    In the later Louis/Eddie phase my priority was making the mtge payments to keep the kids in school. (i,e classic E..warren -two income trap mentality script.) Fails on usurious credit card bills were easily rationalized away as a rebate for exploitative lending the banks extended when we were starting out. They extended the credit believing we’d be good earners, and so did we. It was mutually beneficial, and the banks and the borrower’s understood each other.

    The borrowers were paying the banks default insurance through the usurious rates. Both sides understood the deal.

    The fact that the banks failed to insure themselves with the default insurance premiums we were paying is THEIR fail, not ours.

    There is no moral dilemma here, on the part of the borrowers

    The banks failed in their moral responsiblity to protect their shareholders from default risk.

    They paid the default risk premium to their executives rather than to the risk insurers who would have paid their shareholders for our defauly risk claims when we all lost our jobs, due to their mismanagement.

    AArgh

    1. nonclassical

      LRT,

      …then Wall $treet turned mortgages into “securities”, and worse, “MBS”, then “CDO’s”, and wrote “CDS” against own “mortgage BACKED securities”…understanding the process, one can “follow the $$$$”…read, “ECONned”

    2. LifelongLib

      Glad you mentioned Elizabeth Warren, because one of the things she helped point out was that people today spend a smaller percentage of their income on consumer items than people 40 years ago did. Meanwhile, wages have stagnated while the costs of basics like housing, health care, and education have sky-rocketed. Today’s middle class is profligate only if you think a roof, health, and our kids’ future are things we could do without.

  4. alex

    I’ll buy the irresponsible borrower meme as soon as bank execs try to take a corresponding level of personal responsibility. Seppuku by the entire C-suite would be a good start.

  5. artvandeley

    Last year I researched May 2011 HAMP data for an article I wrote. Having an extensive mortgage background, I could see quickly these were worse than Subprime loans with their 150% LTV and 60%+ Debt Ratios. Modified borrowers weren’t buying flat screens and iPhones – they were laying awake at night scared of the power getting shut off.

    “When you first look at the graph, a mortgage savings of $525/mo and a 14% DTI reduction looks impressive.

    “However, when you reverse engineer the average income numbers, and factor in costs for a family of four, then you realize that HAMP is only delaying the inevitable.

    $2688/mo Gross Income ($32,256 per year)
    $2150/mo Net Income (20% taken out for taxes/med ins)

    $833/mo – 31.0% Front End DTI (mortgage, taxes, insurance)
    $1680/mo – 62.5% Back End DTI (auto, student, cards min pmt)

    “The HAMP borrower has $470 left over for food, gas, insurance, utilities, auto repairs, child care, school activities, medical co-pays, and everything else that comes with providing for a family. Saving for college or retirement is out of the question.

    Best thing the average HAMP borrower could do was default on every debt besides their car payment, live rent-free for 1-2 years, file BK a few days before the FC sale, buying at least another 6 months rent-free living, if not 2 additional years.

    (Servicers are amazingly inept at tracking loans & liquidating properties after the BK discharges. Several friends discharged BK Ch. 7 two+ yrs ago and still live in the house. One friend has stayed 3 years post BK).

    1. Barnaby33

      Seems like this entire line of thinking/writing misses the point. The simplest of truths is that none of these people could have reasonably ever afforded to buy homes but they did. You can argue back and forth about who is wrong, the lender or the borrower. It’s natural to feel sympathy for human suffering, but at a certain point when people become math deficient they deserve to lose, banks or borrowers. We long ago crossed that point and yet the bailouts continue on both ends. So we are still fighting the last war, because no one dares mention the next one.

      1. alex

        “who is wrong, the lender or the borrower”

        Both.

        “We long ago crossed that point and yet the bailouts continue on both ends.”

        Yeah, one end gets a nickel and the other gets the keys to the treasury (or better yet the Fed). And guess which end has people that get paid millions of dollars for their genius in managing money.

      2. citalopram

        The banks were not forced to make bad loans to people who had shoddy credit. Your point is moot.

        1. Paul P

          The mortgage originators deliberately made bad mortgage loans so they could take big fees and sell the mortagages to the banks for securitization. NINJA loans: no income, no job, no assets. LIAR loans: stated income loans. They forged signitures, tricked people into signing for fixed rate loans and had them sign multiple documents. Then they threw away the top sheet with the fixed rate loan.

          They employeed boiler room tactics and hunted for marks. They easliy got around federal and state predatory loan laws. One lender had their sales staff memorize a routine which met the requiremts of truth in lending while having the effect of slipping the significance by the borrower. The orginators were in the business of lending. They made numerous loans and operated in an industry that had a history of loan making. And protocals for assessing loans. The borrowers were first time borrowers or first time home equity borrowers.

          Wall Street was hungry to securitize mortgages and provided bridge loans to salesmen (women) to start their own mortagage businesses.

          This rampant institutionalized industry fraud is well documented. Blaming the borrower is part of the propaganda of distraction. Grandma took advantage of Lehman Brothers.

          Michael Hudson details this story in his book, “The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America…”

    2. GuyFawkesLives

      I argued three years ago when my Washington State legislature was putting together “Foreclosure Fairness Act” (even the fucking name says it all….when is foreclosure ever fair in today’s world?) that if they didn’t clear up the part where the OWNERSHIP of the underlying debt was in the Act, the legislators were just kicking the can down the road. And those homeowners who chose the “mediation” that this stupid bill supplied would be back in foreclosure in 5 yrs, 10 yrs or even 30 yrs. The legislator who is famous for “passing the FFA” looked at me and she nodded, “Yeah, we know that.”

      That was when I knew that she had been paid off, and every single legislator was a fucker. Complete and total fucker.

  6. Tom Stone

    Showalter understands that being poor is a Moral choice (They should have chosen rich parents). Blankfein and his peers are doing God’s work! A The Bible says that it’s easier for a needle to pass through the eye of a camel than for a rich man to enter heaven and that settles it for me.

  7. Susan the other

    Articles like Showalters serve a specific purpose. They change the dialog from FRAUD, MISREPRESENTATION, FORGERY, FRAUDULENT SECURITIZATION, FALSE COLLATERAL, SLANDER OF TITLE, MULTIPLE PLEDGING, and OBSTRUCTION OF JUSTICE to gee, oh gosh I wonder which hapless borrower would be less likely to default on an ineffective mod? It is propaganda at its best. The banks are all criminals many times over and Obama and his henchmen are accomplices.

  8. jake chase

    I read through this crap and watch people devote effort to shred it, all the time wondering how anybody can take these arguments about ‘irresponsible borrowers’ seriously? Their choice was to live or not live. They can’t make any money, at least not enough to buy a house. They watch everyone else buying houses, they watch prices skyrocketing while their paychecks stagnate, they have people calling them offering unlimited credit, they open mail every day offering them credit cards, they see people writing best selling books explaining how to get rich in real estate. Do the idiots writing about irresponsible borrowers think every American consumer went to Harvard? Is it news that people respond to commercial blandishments?

    But what about those who didn’t buy these overpriced houses situated half way to nowhere? Are they supposed to be screwed again by a bailout limited to borrowers? What is needed is a one time bailout of the population, pro rata. Nothing else makes any sense. Wake up and stop writing this sentimental drivel about ‘homeowners’. You simply cannot pick and choose beneficiaries and begin doing justice.

    1. ebear

      “You simply cannot pick and choose beneficiaries and begin doing justice.”

      Who said there was any justice in this world? The strong prey on the weak. That’s always been true. If you’re looking for justice, you’re bucking a very strong trend so you’d better pick your fights wisely, and frankly, this doesn’t look like one of them. That old saying, you make your bed, you lie in it has never been more true than right here.

      To summarize: You got conned and your government did nothing to protect you. Welcome to the real world.

      But as McLuhan pointed out, if you push something far enough, it flips into its opposite. Well, Laissez Faire has been pushed about as far as it can go, so now we’ll get a generation of socialist “solutions” to correct the previous excesses. Count on it, because it will be the same fools who stepped up and bought the big box of dreams turned nightmare who’ll vote it in.

      Sympathy? I have none. Protect yourself from human stupidity is the lesson here. That, and pick the good fight if you’re really looking for justice. Maybe start with women in the third world, or educating children in same. Forget the first world. Stupid sheep got everything they deserve.

      1. jake chase

        The Third World? In ten years we will be living in it. I prefer a fight we could actually win, but good luck with that one.

  9. petridish

    Aren’t the goals of attempts to “restart” or “revive” the housing market to give Lois and Eddie and Vicky and Dave the “confidence” to get this mortgage ATM fueled economic “growth” going again?

    Sheesh! Someone should make up their mind.

  10. alex morfesis

    housing wire is on its last leg…financially it is cooked…its advo-tising business model has failed. They and the rest of the AFN/USFN bankster foreclosure mills are seeing the writing on the wall…

    their hail marry, which everyone should be careful of, is their attempt “once again” (for the millionth time since the depression) is to enact the “uniform nonjudicial foreclosure act”…basically making it possible for some fat guy driving a tow truck to repo your house in the middle of the night, yank it off its foundation and turn it into a reality tv show on some “same old stale bread” cable channel.

    I read HW for the comedy of the suggestions. The more laughable their articles, the more they expose their desperation.

    There is no question that a percentage of homeowners decided to party with that little atm card they got with the home equity line. It was a quick way for the federal government to gloss over the fact jobs were being lost during the first decade of this century. But unlike most, I suspect we are about to step into the roaring teens.

    Hopefully we learn from the mistakes and over stretching of the last decade…otherwise we will be having these conversations again in another ten years…

    The next 30 months are going to be the ones when folks look back and try to explain to their grandchildren and great grandchildren why they hesitated.

    Certainly in those parts of the country where the cheapest housing is still over $200,000 even on the edges of the metro area, there are and will be some continued problems, but in most parts of the country, there is housing that is affordable, and breaks even even as a rental for working class housing.

    Two people working minimum wage with a good credit score can afford a 105,000 home mortgage at todays interest rates.

    I am sure there are folks from my hometown of NYC who cant find a garage space that cheap(although newark is a short commute away, and there is some great brazilian food there),
    but for most of the country, and certainly down here in the tampa bay area, more than 50% of the housing is available for less than 125K…so…as the article suggested and the counter author agrees, it is best to go where the opportunity lies.

    In the 70′s NYC died, and all the “brilliant minds” insisted it would never…ever…come back…

    and that US Steel was always going to dominate american enterprise…and GM…well…its GM…

    google…shmoogle…and apple…those damn hippy loving beatles…yoko and john making a mess of this city…

    I do recall the comments…

    life falls forward…forget the fear…there is always something to worry about…but one should never be afraid…as charlie munger likes to say, gold is for fools who don’t know how to make money…find what you want to do, what you love to do, as it will carry you through the dark moments of doubt…then go live…and enjoy the roaring teens…be well

    1. GuyFawkesLives

      There is NO WAY I would recommend ANYONE buy real estate unless they buy it contingent to a Quiet Title Action to prove up title. NO FUCKING WAY!

      1. alex morfesis

        prove up title…interesting concept…who can sue you…the former owner…if they sign the deed…no issues there…mers…the hell with mers…if a servicer shows up after you purchase, what are they going to say…mers was not authorized to release the mortgage…last I checked…3000 duds are members of mers…sherman act issue for sure…but that’s for another night…there are only two big title companies and two small ones…only one of the small ones has sorta kinda bounced around this problem and been a bit…not much, but a bit annoying to the servicers…Stewart Title…the two biggies..Fidelity…the company that gave us LPS and Docx…who probably spun them off knowing there would be problems…plausible deniability..and the other one…runs corelogic…First American…they are the two biggies…the last real one…old republic/attorneys title cant decide what it wants to do…their general counsel and I have spared on the ABA’s Dirt blog before, but he has toned down his noise over the last year or so…the question with title work is who can sue you and are they getting paid…the mortgage or trust deed is the only thing holding the ownership change back…the note itself is not the security for the debt…and if the “note holder” did not bother filing an assignment ’cause they drank the mers juice, then you have lucked out…Think MF Global…the reason I suspect there will be no prosecution is…drum roll please…everyone does it…all these derivatives need to have collateral from the counter parties…suspect all these “blank indorsed” home loan notes are being lent out by custodians for ISDA compliant derivative transactions…if you want to beat up on the lenders…learn about the CRA and begin to force the lenders who take your deposits to lend. Wall street likes to drag around humans by the tail…and sell you what they bought cheap as some miracle cure for your financial ills…buying real estate today is like a buying the dogs plan…as long as it breaks even its a deal today…and as to title issues…as long as you are not dumb enough to buy from a lender directly, or are at least smart enough to not accept their inhouse phony title company, you will be fine…quiet title lawsuit…not too many lawyers who really know what that means, and certainly many internet bar stool baristers who proclaim they know what that is…remember…every state is different and within your state, your local appeals court can rule in ways that other appeals courts in your same state will not…like politics, all interpretations of laws are local.

  11. GuyFawkesLives

    Talked to two senior execs at two major title companies. The word on the street…..they all know what’s going on and are writing title policy around these issues. So, who needs title insurance anymore? Just give the homeowner a gun and tell him/her that if anyone comes around with a claim, “they know what to do.”

    The title attorneys answer? “It is now a judicial problem not a legislative one.” Brilliant. We’ve got people who KNOW the banks have fucked up title, writing around these fuck-ups so they don’t have to pay claims, and saying, “Let the judges decide.”

    I will never, ever buy property again in this fucked up country. NEVER!

    1. jake chase

      Don’t forget that every title insurer is virtually insolvent and always has been. They were a problem even in the days when the only thing you had to worry about was an incompetent search. I once had a lawyer representing a title company issue me a policy of insurance on the wrong house. He was grateful (and surprised) when I noticed.

  12. Minor Heretic

    I don’t know about anyone else here, but I can’t walk into the bank and demand a mortgage. Like any other schmo, well off or NINJA, I have to ask.

    It’s the responsibility, the absolute responsibility of the person on the other side of the desk, and his/her superiors, all the way up, to look at the borrower, the money market, and the housing market and decide whether or not to lend the money.

    The loan officers and mortgage brokers deliberately failed at risk assessment and due diligence in order to feed money into a profitable scam. Read the accounts of the mortgage brokers as they tell how one standard after another was lowered or dropped entirely in the pursuit of more warm bodies signing contracts.

    Ok, so dimwits tried to get mortgages with abusive rates on overpriced houses with unaffordabble monthly payments. Responsible bankers would have turned them away and no crisis would have occured.

    1. citalopram

      This is the same point that I’ve been making. Blaming the borrower for this mess ignores the fact that it’s the banks’ responsibilty to make sure the borrower can afford it and repay. It is their responsibility to determine the credit risk of the borrower. Like you said, borrowing should not be easy. Easy loan money leads to crises.

  13. citalopram

    ” …analyzed the reported data to show the 2009 mods left borrowers insolvent, and said it’s not surprising that mods that leave borrowers insolvent fail.”

    Don’t sign the terms until they come to the table with a serious offer. Also, don’t pay them a dime more until they do so.

    If they foreclose then so be it, walk away and aggresively rebuild your credit if you can. Circle the wagons wait it out.

  14. DolleyMadison

    You guys don’t seem to realize most of the FC were SERVICER MANUFACTURED out of whole cloth – Ocwen put my (FULL) payments into “suspense” with no explanation until they had enough to declare default, charged a monthly “inspection fee” of 322.00 for inspections that never happened, put 4,000 a year forced placed insuracne on my home when I already had insurance, etc. OF course borrowers cannot pay these kind of charges!

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