Home is where the heart is: this is also where bankers can easily find you and cut your heart out.

I bought a house on a one-way dead-end road. I don't know how I got there.
- Steven Wright

The changes in the lives of us in my household, starting August, 2006, have been incredible and expensive: we bought a house; my son was diagnosed with Autism; the banking industry gave a frightful public display that Gordon Gecko wasn't completely correct and greed really isn't that good; I was working for a bank so I got laid off and went unemployed for 4 months, eating all our savings; I got a job finally which rewarded me a 30% pay cut. And here we are.

When you're at the end of your rope, or your last dollar, something's gotta give, they say. So what gave? The mortgage payment. Sorry you silly, greedy bankers. My son is worth a hundred of you sleazy fuckers, and you got a bailout. We didn't.

We retained a real estate specialist who no longer sells real estate – he and his wife now specialize in steering homeowners like my wife and I through this insane process of ridding ones' self of a mortgage and a home. Note that ridding one's self of a mortgage comes with an unfortunate side effect or two: you can't keep your house of course, your credit is destroyed for 3 to 10 years, and everyone thinks you're a loser.

This, gentle reader, is the joy of modern home ownership, the last remnants of the American Dream. I have already blogged up a shitstorm of cheery, long-winded depictions of the developers, realtors, builders, mortgage brokers, lawyers, and bankers who gleefully explained what a great time it was to buy a house, mortgage rates are lower then ever, you won't take a hit in Charlotte, North Carolina because there was never a bubble here! Buy! News flash: we fell for that bullshit and here we are. On to the latest updates, because the gears are turning a little faster these days.

We submitted the paperwork (5 times – you cannot accuse mortgage service companies of intelligence) to obtain a “HAMP“ loan - that's the "Obama modification" that has turned out to be a complete failure, as it makes everyone happy but homeowners. Beware presidents bearing good financial news.

We didn't qualify because I make too much money. Never mind my son's needs.

Now we are amid the fun and games of step two - the "in house modification" loan. This means the following: the bank looks at its need for profits, and since I can qualify for the loan they take the full principal, add in the legal and late fees from the foreclosure process (and, oddly, they add missed payments above and beyond the principal - how is this legal?), then they reduce the interest to about 4% and stretch it all out to 40 years.

Let's talk numbers: my $260,000 mortgage balance will now have a principal balance of $290,000 - $300,000, and it will be paid off when I am 87 years old, should I live that long. By the way, the house is currently – and optimistically – estimated to be worth about $195,000 to $205,000.

How does this help? Ah, sorry. It doesn't help *me*, it helps *the bank*. I forgot. Fuck me. They're the ones who need the bail out. Trickle down, all that.

So we will refuse their offer, and then it's the last two steps. Step three: short sale. The realtor we hired to help us through all this fun will list the house for 90 days at about $225,000. If an offer comes in (unlikely; there are 5 other homes currently listed for short sale in my neighborhood alone) we update the mortgage service company, who can accept or decline. I hear they almost always accept, because at that point it's their best bet. Remember: they cannot reduce my principal, that would mean a loss, but they can accept a short sale, because...that would mean an identical loss with a new buyer. It's the new math. I must be old math.

And if there is no offer, and the short sale fails, we go to step four: the Deed in Lieu of Foreclosure. This should happen about some time in December, and it can be tricky. The banks first openly attack with a foreclosure bill for about $30,00 to $50,000 for "fees, past due payments, and services", which we decline and make a counteroffer of $0 and the deed to the property in return. It costs the bank a lot of money to make a foreclosure happen, so negotiations ensue. Eventually an agreement is reached, and we surrender any claim to the deed to the house, then we scamper off and become renters. Hopefully, we scamper away with only a small fee to pay.

Meanwhile, my credit takes a hit, but that hit does not say "foreclosure", it says “deed in lieu of foreclosure”, so it hurts less. This can matter a great deal later on.

Freddie Mac and Fanny Mae, those trustworthy organizations which approve mortgage loans for homeowners, did not die as they could have when the ax fell on this country's mortgage business. They live on, and despite the fact they are intellectually and ethically the least able to be empowered with the task of underwriting loans, they still do just that, as it is evidently necessary for the fox to run the hen house in this whole sloppy business.

If you have a foreclosure on your credit report, these organizations essentially blacklist you. There's no rulebook I can find, and the math they use to do it is every bit as arcane and idiotic as the math these scumbags used to get us here in the first place. Suffice it to say it could be two to five years post-foreclosure before one can buy a house again, and it could be as many as ten. Credit scores, size of down payment, all that factors in, of course.

Outcome: we will rent for a long time.

Lately, there are organizations and services out there which claim you can get your house from the banks for “free”. Seems there are huge gaps in the paperwork filing and chain of information processes for mortgages, and if the banks involved make a major enough mistake in the paperwork a judge can rule the home was never sold on a properly executed contract, and award the entire house to the buyer.

A “forensic loan audit” can uncover these things, and the number of firms (mostly realtors with little left to do but fleece their customers in a new, more inventive way than before) performing this service seems to double every day. Problem is, this process is not only uncertain, it is invariably expensive: up to $5,000 or more up front, and this includes a down side: if no issues are discovered you must pay the five grand AND possibly continue to suffer your way through a foreclosure. I investigated these guys a bit, and as it always sounded too good to be true, it took no time at all to find evidence that it is just that. Google it. It's an amazingly slick way to get fucked over.

Here we are, entering the fifth month of negotiation, filling out the same forms over and over again, talking to a mortgage servicing company who is as interested in helping us as they are in lighting themselves afire; unless, of course, there is a profit in there somewhere.

There is no heart in the housing market any longer: there are those who bought before the ax fell, and those who bought after. We bought after. So did a few million others, convinced as we were that this little burp would pass, that it might take a year but those housing prices would stabilize, because hey: they always did, right?

Among a host of other painful problems experienced by common, everyday people, the business of building, selling, and funding homes remains mired in the same murk it has been for the better part of four years now. That does not stop the gears from turning, however: they turn just as they always did, with not but a hint of desperation in the threatening grinding and squealing sounds the fantastically mindless mortgage banking machine makes these days.

Turn on your television and wait – soon enough you will find a commercial from the National Organization of Realtors. An attractive, stern-looking yet smiling woman walks sanguinely in front of a big salt box house, white with black shutters, the iconic picket fence surely present behind her. Confident, she smiles as she walks. She seems serene. Then she says it:

“There has never been a better time to buy a house.”

This very commercial was on the air in 2006, when we took the keys for our home. It was on the air the following year, when the market had already been trough a small uptick, but prices were already dropping and the news was getting worse and worse. It was probably on the air at one point or another as Cramer was on CNBC making his wildly bizarre claims that everything was just fine, just fine, Lehman can't fail, it's just too big.

And it was on the air just last night. There has never been a better time to buy a house, we hear. It has to be true, or the developers, the builders, the bankers, the realtors wouldn't say it, would they?

Never a better time to buy a home. Like the time in the near future when I hand my keys over to someone and walk away from this place. Two years from now when the yard is all but weeds three feet high, and the windows are glazed over with the patina of dust that somehow makes abandoned homes look so old and tired – there is a house right next door to this one that looks that way already. Another right down the street. Mine will join them.

Never a better time to buy a home. Interest rates are low and these places are going cheap...but they cannot go cheap to the people currently occupying them for whatever ludicrous, byzantine reason. Better for the banks to lose twice than not at all, I suppose; all the better to secure a way to demand another bailout.

Never a better time to buy a home.

Thanks. I'll remember that.


  1. Hey Cat, My BFF lost her job a couple of years ago and hasn't been able to find one to replace it. She moved in with me back in February when her electricity and gas was finally turned off. Needless to say, I can sympathize with your housing troubles. She's now arguing with the bank which wants her to pay to have the electricity and water turned back on so they can appraise it! They have some disappointment in store.

    In the meantime, I may sink. I can currently afford my payments (although it's difficult since I'm supporting two unemployed persons on my single-person salary) but it's frustrating to know that I owe $280,000 on a house which appraises at, roughly, $170,000.

    It's truly a mess out there. What sucks is that people like you, and me are trying to clean up the spoiled, rotted milk that the greedy MFs at the top spilled.

  2. We bought our place at the top of the market. We got a good deal on it, but it was a good deal for the top of the market, if you get my meaning. We live in a development that contains 21 tall, skinny townhouses.

    There are three very large units. One has been for sale for two years. The owner has dropped the price over $300,000.00 from his original asking price over that time. Another of the large ones was sold because of a job transfer. Her company had a buyback plan, so they sold for less than HALF what it's worth, even in this market. The third unit is owned by someone who works for a television network (he's a talking head), and HE'S been transferred. I see sign up for their place, but I hope he's not holding his breath on that one.

    Some of the smaller units are also for sale, three have been rented. The rest have either given up trying to sell or have given up trying to move. One couple is just going to leave the place empty while they move into the NEW home that they bought and are making payments on both. We'll see if that lasts.

    The units that have sold went so cheap that we don't stand a snowball's chance in Hades of getting anything for our place if we try to sell, so we've resolved to stay put. There was a time when we thought we'd move into a bigger place, but since that's not going to happen, we're here until we retire in ten years or so. Thankfully we can afford the mortgage.

    This is ONLY a good time to buy a house if you have the cash to do it and you don't have to rely on a bank for more than 25% of the purchase price. Otherwise forget it. There are so many hoops to jump through now that it just isn't worth it.

    But just think Schuyler - you can move to this part of the country and have unlimited access to your favorite bourbon!

  3. Ugh! The part that confuses me most, Schuyler, the part that really chaps my ass (not to say that all of it isn't just a big, huge ball of horse shit) is that you can't buy back your house at the rates they're going to advertise it for once they force you out?!?! I mean, where is their culpability in this mess? Why is it, as you say, that after the bail out, after the TARP, after all of that, you have to shoulder the entire load of collapse via your credit?

    George Carlin did say it best, "If you can't beat them, arrange to have them beaten." The fuckers.

  4. What I'll never get is this: The banks want to sell it to a third party, still for more than it's worth. Since most people who still have good credit (I remember those days fondly; too bad I had no money at the time!) can afford to buy a newer house for less money than the banks want for a similar but pre-owned house. Is there some banker logic somewhere which says, "Hey, once these houses start falling down from disrepair, the value of the neighborhood goes down from the squatters and vandals and transients who have taken up various lengths of residence in these houses, and the house finally gets condemned as uninhabitable as the roof starts to leak and the foundation starts to settle and crack and the pipes freeze, it'll be worth even more when we sell it to someone who has to bulldoze the existing house in order to build a new one!"?

  5. Oh Schuyler! I'm so sorry you're caught in this horrible roulette wheel. Kafka couldn't have come up with a more absurd and nightmarish scenario....

    But I'm sure that you and your family will do alright. You all have brains and spirits and imagination and laughter and it seems lots of love, all things that "banks" are obviously bereft off.

  6. Ah, Schuyler, sorry about the mess but I believe you are playing the game as well as it can be played. My wife and I are in that line of work. She is a full-time Realtor (it's a trademark) still making a living at it and I have a broker's license for emergencies.

    Meanwhile, since the state Real Estate Commission sells their mailing list, I get a dozen junk emails a day. There is a whole big industry out there offering to turn (failing) real estate salespeople into foreclosure prevention/loan modification/short sale specialists. None of them are competent but there is no bigger sucker for a sales pitch as a salesperson.

  7. CoolOne, the "bigger fool" theory never fails. A smart banker tries to take his hit and move on since the first hit is the cheapest. Sadly, there are not a lot of smart bankers out there and they are on the commercial loan side of banking. Commercial lenders have always had to deal with foreclosures and restructuring even in good times.

    Most people in the residential loan industry had never seen a downturn and they don't teach anything like that in MBA classes either.

    The reason existing homes sell for more than comparable new homes is typically better construction, a yard and landscaping, the initial bugs have been fixed, and the settling is over. Maintenance starts from about the third year after a house is built.

  8. Tonto, I have to agree with what you say about there not being a lot of smart bankers out there. Here in the Sacramento Area, the houses are put up as short sales, receive offers, then the potential buyer generally has to wait months to hear back. They're looking to get the highest offer. Meanwhile, the house values keep dropping and the buyer will often give up trying.

    My daughter tried to buy a house in my neighborhood last year and was outbidded (and once underbidded) by investors. She ended up befriending a nice Realtor who showed her a house that had just been purchased at auction by an investor. She put her bid in before it was advertised for sale, then had to struggle to find financing. They are refusing loans if they think a house has been "flipped".

    As for me, I remodeled in 2006 - now I have $360K in loans and a house worth about $215K. Fortunately, I still can afford the payments, but have no hope of refinancing my 10-year interest only loan.