Individuals Facing Foreclosure: Sympathy or Contempt?

On Monday, September 27, 2010, the first of a two-part series aired on NPR (I believe during All Things Considered) entitled Life After Foreclosure: Coping With Bad Credit.  I didn’t hear the broadcast but read the article online.

I am now in the habit of reading listeners’ comments.  The comments ranged from listeners who felt bad for individuals who lost their home to listeners who blamed individuals for placing themselves in that predicament.

Were banks and mortgage lenders predators?  Were prospective individual homeowners fleeced? Or did prospective individual homeowners “go along” with the game and bought more house than they could ever afford?

The answer is all of the above.

Yes, you had banks and mortgage lenders who were only concerned about the fees they generated.  It became so bad, and the banks and mortgage lenders were so addicted to the profits they generated, that they actually LOWERED the standards for issuing mortgages.

Do you recall the phrase NINJA mortgages?  NINJA stood for no income, no job, no assets.  Yes, prospective homeowners WITHOUT income, WITHOUT a job, WITHOUT assets were approved for mortgages.  Outrageous.

Banks and mortgage brokers were creative in other ways.  “No doc” loans (prospective homeowner did not have to produce documents verifying the information the provided in applying for a mortgage), negative amortization loans, interest only loans, 80/20 mortgage (piggyback loan – created to avoid paying PMI – private mortgage insurance – when a homeowner does not purchase with a 20% down payment).  Banks and mortgage lenders created a variety of instruments for prospective homeowners.

[CONFESSION:  When I purchased my house in 2005, it was a 80/20 mortgage.  The first trust (80%) was interest only [fixed for the five years] and the second trust (20%) was variable.  The interest rate on the first trust was 5%.  My mother had advised me to go for the fixed rate mortgage, but I was concerned about having a higher interest rate.  Of course, by June 2005 I was a tad concerned about the increasing interest rate on the 2nd trust.  I, fortunately, was able to refinance in September 2005 with my credit union and obtain a fixed rate for both the first and second trust.  The interest rate on the first trust is 5.875%.  Of course if I had taken the fixed rate at the time of the initial settlement in January 2005, the interest rate would have been 5.4%.  Yes, my mother was right and I should have listened to her.

And, yes, I did STRETCH to purchase my home.  But I didn’t go HOG WILD when the mortgage broker told me I was pre-approved for a mortgage of up to $500,000.  I knew I couldn’t afford monthly payments on a $500,000 mortgage.  The house I purchased was just under $400,000.

And, I have not had cable or satellite tv since I purchased my home.  I mow my own yard.  I grow my own produce (1st year).  I pack my lunch.  I take many steps to be frugal and live within my means].

So banks and mortgage brokers share responsibility for the housing crisis.  But so do individuals.  Yes, some were definitely taken advantage of [I recommend watching a segment of In Debt We Trust or especially Maxed Out].  But minus this category of individuals, a lot of individuals knew they couldn’t afford to make those mortgages payments or stretched quite a bit without a willingness to cut back on their lifestyles.

Returning to the comments of NPR listeners, some view the issue from a moral perspective.  Some listeners say obtaining a mortgage is a legal contract and a social one and the homeowner must honor his commitment by paying the mortgage.   These listeners are particularly disturbed by homeowners who can afford to pay the mortgage but because the house has dropped in value and the mortgage is “under water,” consciously walk away from their obligation.

Other listeners have a different perspective.  Some note that businesses have “strategic defaults” or will file for bankruptcy protection, either reorganization or liquidation.  How come there are no complaints about the moral obligation of businesses?

I found interesting the following comment by Bob Harvey, a bankruptcy attorney:

As a bankruptcy lawyer — who represents both debtors and creditors — I’m pretty comfortable reporting that a lot of bad things happen to people which affect their FICO scores, but which are not symptomatic of bad behavior, irresponsibility, profligacy, reckless disregard or any of the other myriad character defects that some of the more self righteous posters here seem to think.

If your FICO is 780, congratulations, but that credit report doesn’t come with a deed to any moral high ground.

Most Wall Street bankers have pretty solid FICO scores.

by Bob Harvey posted on Monday, September 27, 2010 8:11:42 PM. (These comments remind me of a bankruptcy attorney featured in the documentary, In Debt We Trust).

Should we  (those of us not facing foreclosure or short-sale) be sympathetic toward or disgusted with those who have or may lose their home?  Well, one cannot control how people feel.  But one should not harbor ill-will too long.  Express your point of view and get it out of your system.  Then we as a society need to deal with the split milk.

And, don’t forget, not all individuals facing foreclosure or short-sale “bought too much home.”  Due to the Great Recession, individuals have lost their jobs, have not found new jobs, could not pay their mortgage and now face foreclosure or short-sale.  I have more sympathy for individuals under such circumstances.  Honestly, I can say, but for the grace of God, there goes I.




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BEWARE: 365megavolt.com

Since my Debit Card Compromised post of August 18, 2010, my blog has received three comments from individuals who discovered (or the bank discovered) unauthorized small debits or charges by 365megavolt.com.  [And 50 individuals have viewed that post within the past week.]

In my case the amount of the debit was $9.88.  The thieves who are perpetrating this fraud assume the amount is too small to be noticed or will be overlooked because the amount is so small.  Hey, no amount is too small for my eagle eyes.

Beware.  Take steps to protect yourself.  Check your debit card and/or credit card accounts weekly (if not daily).  It takes less than a minute.  If you spot an unauthorized charge, let the card issuer know ASAP.

And, if anyone else has unfortunately been the victim of 365megavolt.com, please SHARE your experience with this blog.

We need to put the thieves behind 365megavolt.com OUT OF BUSINESS.

Gift card instead of credit card

I wish there was a way to pay for services online with cash. I tried the equivalent, using my debit card until someone recently made unauthorized purchases on my debit card,

The next best thing is a gift card. Yesterday evening I stopped by a local Radio Shack to purchase a $15 gift card. (To deter unauthorized use, the Radio Shack employee must activate the gift card upon purchase).

I purchased a $15 iTunes gift card more than a month ago but I cannot find in my house.

What’s great about iTunes is one must redeem the full value of the gift card. It’s then easy to add more money to one’s account. And what I especially love about iTunes is the fact it maintains the loose change in your account. I had $0.42 sitting in my iTunes account for more than a year before adding $15 last night.

I wish other companies would provide such a service. For example it would be great if Amazon.com had such an account.

Apple is the leader when it comes to innovation. Other companies should follow Apple leads.

Meanwhile, need to find that Borders gift card with less than $5 remaining. Annoying!

Consumer Reports on Money

If you can afford to subscribe to only one personal finance publication, spend your hard earned dollars on Consumer Reports on Money.

Like it better known predecessor, Consumer Reports, the on Money publication accepts no advertisements. Thus Consumer Reports on Money is able to be more frank about mutual funds without the fear that a mutual fund company will yank its advertisements if reviews are too critical.

Each Consumer Reports on Money issue consists of 16 pages. Each issue has a checklist to organize your financial life (this former Air Force Officer LOVES checklist). For the October 2010 issue the five items on the checklist are 1) cyber security awareness month, 2) draw up a budget for holiday gifts, 3) review your employee benefits, 4) if you filed for an extension on your tax return, October 15th is your day of reckoning, and 5) take advantage of seasonal sales on bicycles, gas grills, and winter coats.

Other regular features include “This
Month’s Money Tips,” “money savers,” “family money,” “Money Lab” (detailed analysis on a particular financial topic, and “retirement guy.”

Check out Consumer Reports on Money. It is definitely money well spent.

No gym membership required

I have a dog. He needs to be walked daily. We used to be able to cover considerable areas in a short period of time. My beagle however is now 11 years old. He’s slowed down tremendously. Yet he still insists on walking the same distance.

At first I was a little frustrated because of how slowly he moved. If I allowed him to walk in front of me (to give him a head start), he would walk only
a few feet, then stop and turn to me.

I finally devised a solution to adjust to Bobby’s much slower pace. When I walk him, I kick my right leg across toward the left. With the next step I kick my left leg across toward the right. I’ll do this sequence of exercises for up to 40 minutes.

It’s definitely a workout. Drivers traveling along the path I walked have remarked, “you get a workout doing that” to “are you a professional dancer?” Of course I’ve also received puzzled glances.

But those stares don’t concern me. I am no longer frustrated as I walk my dog. And if my thighs could speak, they would declare, “it’s about time!”

Yippee, no loss of value on gift card

Last July for my birthday my brother gave me a $50 gift (Landmark Theatres).  Work, taking care of my late great aunt, gardening, the dog, genealogy, exercise, volunteer work – just life – seem to get in the way and I couldn’t find time to attend a movie.

A year passed and I was a bit anxious.  I hadn’t used the gift card.

Last Tuesday my brother and I decided to see a documentary, The Other City, at Landmark’s E Street Cinema in the District of Columbia.  Since I was uncertain of the value on the gift card, I shoved a few extra $20s in my wallet.

I’m happy to report, although I didn’t use the gift card until more than a year later, no fees reduced the value of the gift card.  I was thrilled.

I have about $22 left on the gift card.  Enough for two more movies and a pretzel.  And there are more than two movies I plan to see in the near future 🙂

No more “good debt” vs. “bad debt”

Just a few years ago personal finance gurus would label debts good or bad.

A mortgage was considered good debt, a credit card bad debt. And a student loan was considered good debt, but a car loan was bad debt.

In this age of the Great Recession (which apparently ended in June 2009) if you lost your job and don’t have a source of income, ANY debt is BAD because of the anxiety and stress of the unpaid bills.

Whenever this recession ends IN THE REAL WORLD, I hope we consumers reject the classifications of good vs. bad debt. Any debt dangling around one’s neck is bad.

We consumers need NEVER forgot these difficult economic times and pledge to live within our means WITHOUT incurring any new debt. And get rid of old debt ASAP.

As for government debt, well, that’s a topic of a future post.

The recession ended over a year ago, huh?

Okay, the panel of experts announced the recession ended in June 2009. Do you feel more confident about the economy? Do you have family members or friends who are still unemployed? I do. Do you feel comfortable charging for things you desire or want, not need, because you have 6 – 8 months of emergency funds set aside or you know your job is secure?

Although technically the recession ended a year ago, it doesn’t feel or seem that way to me. Do you agree?

Why I wait in line at the credit union on paydays

Yes, there’s the ATM, but the ATM dispenses $20 bills only. Because I want bills of other denominations, I wait in line.

A gift from Memorial Sloan/Kettering Cancer Center

Unsolicited gift from charity, appears to be an assortment of Christmas cards.

The outside of the package asks,

What would you give to see a world without cancer?

Obviously who wouldn’t want a world without cancer. But for me, the question running through my mind is,

What would I give not to receive another unsolicited gift from a charity?

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