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More California Homeowners Walking Away

Black Voice News, News Report , Chris Levister Posted: Apr 23, 2009

Theres a real hunger for some good economic news out there and while government officials see faint glimmers of recovery on the horizon, major indicators paint a starker picture.

On just the home foreclosure front consider this: According to March housing data 1 in every 159 homes with a mortgage in the U.S. was involved in a foreclosure filing within the past three months alone.

Just as rising spring sales planted a seed of hope in the housing market lighting struck. Foreclosures shot up 46% last month over a year ago.

Fannie Mae, Freddie Mac, many banks and certain states had frozen foreclosures in a run up to details of President Obamas rescue housing plan. Now companies are flooding the market with eviction notices.

Last month Michael Taylor and his family walked away from their two-story brick home off Columbia Street in Riverside rather than face the frustration and humiliation that comes with what they call the dreaded f word; foreclosure.

They told us, hold on help is on the way, recalls Mr. Taylor. The couple claims they were under water when an Internet based mortgage rescue firm urged them to stave off foreclosure while Obamas program made its way through Congress.

Owing more than the house was worth the Taylors failed to qualify for loan modification. Now we know that was a costly mistake, said Ms. Taylor.

We were reduced to groveling idiots, begging, pleading with lenders, rescue specialists, just about anyone willing to listen, she said. In the end the family resorted to sending jingle mail (house keys and a note) to their lender.

The Taylors arent the only homeowners frustrated by aggressive foreclosures and new modification and refinancing options.

Despite highly publicized mortgage help programs made available under the Obama administration, mortgage experts say in the hardest-hit areas of the U.S., such as California, Michigan, Nevada and Florida, new modification and refinancing options wont necessarily help homeowners because loan to value ratios which compare the loans size and the homes value are too high to qualify for the new programs, according to Rick Sharga, vice president of marketing at RealtyTrac, the Irvine based distressed property research firm.

Some people are going to do the math and make the decision to cut their losses, said Sharga.

Homeowners are understandably frustrated, says Inland realtor Cindi Shutt who specializes in real estate and bank owned properties at Montage Real Estate, brokers at Jeremy Devine and Elizabeth Edmond Realty. Recently she recalls seeing a moving van in her neighbors back yard. I said oh wow theyre getting new furniture. Turns out says Shutt three weeks later the home was empty.

I said, oh my gosh they even took the gate. When you see it happen, you have to ask yourself could that have been avoided.

Experts say for some homeowners like the Taylors who live in one of Riversides most foreclosure heavy areas the walk away approach makes sense.

It makes sense for people who bought at the market peak and are under water on their loan, meaning that they owe more than the house is worth. said Sharga. It also may make sense for people who are forced to move, people who already have damaged credit and people who stand to lose more in a short sale especially in states that allow deficiency judgments in which the seller must repay lost equity post-sale.

Along with rising interest rates on bad loans, there are certain hardships i.e. catastrophe illness, death and loss of a job that automatically qualify homeowners for loan modification. When the debt ratio is so large, Shutt says she advises homeowners to go to their lender tell them to try modification or short sale rather than foreclose. Try to save your credit. Its more palatable and humane than moving out in the dead of night.

Shutt who recounted the time she personally accompanied broker Jeremy Devine on a foreclosure notification.

The lady opened the door. She was very pleasant. We said Ms. the bank bought your home. You have two weeks to vacate. I watched her face contort. She wept like a baby. I wanted to hug her. I touched her arm. She said Oh my God, no this cant be happening.

She said we have family - children. Doesnt that matter? They got a lawyer. Lender negotiations failed. They did all the right things. Foreclosure leaves a visceral blueprint, said Shutt. Shes trying to help the family find a place by May 8. Shutt who spent 30 years in corporate management says whats become clear, is many distressed homeowners lack basic knowledge on how to avoid foreclosure.

What you have is chaos in a vacuum. The landscape is flooded with promise the world infomercials, complex government help programs, screaming lawyers, Internet rescue firms, lenders, realtors, scammers, family members, friends, blah, blah, blah. People are like, what should I do. Who should we trust, said Shutt. Start by contacting your mortgage holder whether it be a banker, credit union or private mortgage investor, thats the critical first step, says Shutt. Identifying the right that controls your mortgage is often easier said than done.

The original loan you signed with say Wells Fargo or Countrywide may well be owned by a third or even a fourth party. Shutt says too often homeowners waste precious time chasing the wrong lender. By the time they get to the person who can actually modify the loan its too late.

Were in a state of financial 911. Companies and lenders at the department levels dont always share whats happening to a loan. Communication is the key. Homeowners should verify what is being done.

She says consult your family realtor. If you dont have a realtor, ask the California Association of Realtors to recommend one.

Interview that realtor as if your life depends on it. You want to ask them key questions: Have you done short sales? Have you worked the foreclosure process with REO (real estate owned) asset managers? Hold their feet to the fire, said Shutt. Dont just hand the foreclosure notification to someone and say fix it. That realtor must be able to say to the lender drop the listing price even if it means they walk away with a big loss. Theres nothing pretty about foreclosure. Its not just about money. Youre salvaging lives.

Related Articles:

More Foreclosures Could Mean More Illegal Dumping

Crisis: Homelessness Population Grows, Tent Cities Thrive

The Silver Lining Behind Californias Gloomy Economy

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