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30 Issues: Victims of 2008: The Foreclosed On

Monday, October 01, 2012

30 Issues in 30 Days is our election year series on the important issues facing the country this election year. Today: How to end the ongoing foreclosure crisis and relieve those who have lost their homes. Visit the 30 Issue home page for all the conversations.

Open Prep: Questions, Articles, and Links to Get You Started

Key Questions

  • Why won't Obama force the banks to help?
  • What is the demographic breakdown of foreclosure victims, and what does it suggest about voting trends?

What are your key questions on this topic? Post them below and get the conversation going!

    Guests

    • Roben Farzad, contributor for Bloomberg Businessweek, lays out what both candidates in the election want to do about victims of the foreclosure crisis, and explains what has been effective so far.

    30 Issues Interactive from WNYC Data News

    Got a Follow Up?

    Each Friday we'll be following up on one of that week's issues. Got a particular follow-up question from this conversation? Comment below or tweet us. 

    Comments [46]

    Eugenia Renskoff from Brooklyn, NY

    Hi, to Vlodko, I believe in me, in my truth. My loan officer lied about my income (not my credit score because it was 754 ath the time). I found out about it when I thought it was too late to turn back. He got his fat commission and I eventually lost my home. Greed played no part in my purchase. I just wanted a small one bedroom condo. I got that and a nightmare. Eugenia Renskoff

    Oct. 02 2012 04:45 PM
    Eugenia Renskoff from Brooklyn, NY

    Hi, Here is how I have visualized my foreclosure experience: I lost my home in GA due to predatory lending/mortgage fraud. I paid my mortgage up to the last minute, even maxim out my credit cards. I lost my savings. I lived with people who didn't want me, sleeping on their couches. I even slept on the street and the subway.I ate out of soup kitchens ( I am very grateful to the soup kitchens, especially the St. Bart's soup kitchen near the Waldorf Astoria). I could not sue because I had no money for a lawyer. Whether foreclosure happens in NYC, Atlanta, GA or any country in the world, the bottom line is: it is a horrible and crippling emotionally, financially and psychologically). It should not happen. It does not have to happen. Now I feel displaced, as in displaced forever. Eugenia Renskoff

    Oct. 01 2012 03:51 PM
    The Truth from Becky

    Greed played a part on both sides..should not have signed off on a loan without doing the math, just to get a bigger house...and the lenders certainly should NOT have been trying to scam the public....irresponsible on both sides!

    Oct. 01 2012 12:08 PM
    PK

    critical to note that even someone whose home value is currently down say 40% like the previous caller is not a victim compared to paying rent, in which case they would be paying an indefinite mortgage at a 100% loss..

    also important to note that when taking out a mortgage, someone is automatically paying about 2 times the actual value of the home anyway, so in effect, unless benefiting from a tremendous growth in value, a home purchase is almost always a loss when taking out a mortgage... still smart though, compared to paying rent. not sure why this isn't mentioned??

    Oct. 01 2012 12:04 PM

    @lj

    What about the mortgage applicant who did not lie, but the unscrupulous banker who lied (inflating income or credit wordiness) on his behalf, without even telling the borrower, just to make that EXORBITANT commission for himself? As an impartial observer, who do you believe?

    Oct. 01 2012 12:04 PM

    People have an emotional connection to the idea of owning a home. It is seen as a symbol of personal success. That's why it was so easy for the banking and Wall Street industries to manipulate the system, create the asset bubble and this disaster which now is tearing apart our country.

    Let's say a home was purchased for $500,000, no money down, and the value has dropped 40% so it's now worth $300,000. Should anyone encourage the home buyer to fight to stay in the home and continue paying $500,000 on a home that is now only worth $300,000? Of course not. Most of the energy on behalf of people in foreclosure, however, has been aimed at exactly that: help them continue to pay more for an asset than it is worth. The reason for this is because of the emotion associated with being a home "owner." People need to let go of that emotion and get real.

    What should happen? People should stop paying, let the bank foreclose. The house is worth $300,000, and that's the most the bank will get if they sell it. The home "owner" could go around the corner and buy the same house for $300,000, if they otherwise were employed and their credit was not impaired.

    The banks made the risky, speculative loans at a time when they knew the asset bubble had inflated the cost of housing. The banks took the risk and they should take the loss. Before Clinton deregulated the banks, a home buyer could only borrow three times their gross income, and no more than 80% of the value of a home. The average American family earns $55,000/year, which means under the old rules, they could borrow no more than $165,000, and would have to put down approximately $40,000, for a home purchase price of $200,000. That means most homes would sell for around $200,000. I'll bet the inventory in the nation is still priced at twice that.

    People now pay an unsustainable percentage of their gross income on housing. We need to get it back down to 25%, which means the price of housing needs to continue to fall. The banks should bear the loss. The federal government should not stop foreclosures or buy bad mortgages from the banks (which they keep doing with my money) but instead should work with local credit unions to make loans to people who lost a home to foreclosure. If the person is working, and otherwise is a credit risk, the fact of foreclosure should not prevent them from buying a home.

    For foreclosed properties, local communities should form community groups and sue the bank/owner of vacant properties if they are not maintained. Sue them for nuisance, try to get a judgment and foreclose on the property, sell it to a member of the community at a fair price.

    Oct. 01 2012 12:03 PM

    For investors, business planners and others, the government and its puppet masters are guilty of making our economic system unpredictable, by manipulating its behavior so thoroughly -- to the detriment of those who actually believe in the integrity and beauty of it, as it is taught in school and lionized in the American Story.

    Little wonder "business leaders" spend their efforts figuring out how to profit in the short term, then cash out before they are the ones holding the hot potato.

    Oct. 01 2012 12:03 PM
    Henry from Katonah

    Part of the solution should be a massive national proram to license mortgage bankers. Why are securities brokers and real estate brokers regulated and not the bankers? Robo-signers should be suspended from morgage lending for 10 years. Any banker who loaned to borrowers who obviously could not afford a home should be suspended for at least 10 years. Anyone who supervised the bankers above should not be licensed. Are these punishments adequate to the crimes? Some will say yes and some will say no - - I think I have a great idea here ...

    Oct. 01 2012 12:03 PM
    dorothy from Manhattan

    Oh for heavens' sake! The homeowner will feel bad if his house is worth less than he paid. Too darn bad! When you buy a car and drive it off the lot your car depreciates by half or a lot and your loan is for more than the care is worth. Real Estate is a commodity. There are no guarantees. You had the use of the house in the years you've lived in it. Where is it written that you should be able to live cost free?

    Oct. 01 2012 11:59 AM
    Kathleen E Lo PINTO VIGNOLINI from Long Branch, NJ

    The first guest has it right, this mess was caused by more than just "home loans." As to foreclosures, the fault for this crisis lies with various concerns.
    1 The developers wo built condo's & homes and upped the cost annually (In Long Branch, 2002, condo's on the beach were $ 200,000, by 2006 they were $ 700,000! All properties taken by Eminent Domain!)
    2 The realtor who vigorously sold homes above their true values, increasing their profits.
    3 The banks, appraisers, & their lawyers who lied about the "affordability" & then SOLD those mortgages to increase their own incomes.
    4. Wall Street Firms & brokers who devised these default swaps, bundling of mortgages, & hedge funds against these loans.
    5 Most disturbing, our own Government that whittled down the rules & regulations on the financial sector, especially ending Glass Stegall Act, & not enforcing our Anti-Trust laws.

    Oct. 01 2012 11:59 AM
    Jade

    Hold it! Just because the value of your home has gone down you think the govt should help you out????

    What about my law school loan? I wss admitted to the bar at the start of the crisis, and haven't had a steady job since. My degr3ee will never "come back" and I'll never have a steady job with benefits. No one is helping me.

    They still have a place to live and are getting tax deductions.

    Oct. 01 2012 11:57 AM
    John A

    Hasn't everyone noticed how your personal freedom to be greedy was prominent in our culture for decades? Now re-read your old sunday/saturday school lessons about "false gods".

    Oct. 01 2012 11:56 AM
    valentine from brooklyn ny

    It's a rare case when Brian failed to mediate - when Robert Shiller said that the sails of those dubious mortgages that brought eventually the whole system down weren't illegal. "May not be moral but not illegal."
    And Brian let this obviously inept comment pass without any comments!

    Oct. 01 2012 11:53 AM

    "Can anyone explain how someone who put no money down, lied on the mortgage application, then failed to pay the mortgage is a home OWNER?"

    This is where, as I said in my earlier comment, that the lenders need to be held even more accountable than the borrowers. The terms of a mortgage are written by the banks, not the consumers. It was the BANK'S decision not to require a down payment. It was also the Bank's responsibility to verify income to make sure that the borrower can pay back the loans - and the banks didn't do that either.

    Now I actually agree with you about the term "owner". I'm an accountant and I have to tell people all the time that if you have a mortgage on a home, you don't own that home. You own something only when you pay it in full. I got to the store, buy a shirt, pay with it in cash - then I own it. If you're house costs $500K and you didn't pay for it outright, you don't own it. The entity that lent you the money to cover the price of that house is the true owner.

    "As instructed, I invested in my retirement account rather than speculating on real estate. I have lost far more value than these "homeowners." Am I going to be bailed out?"

    I don't know what your portfolio looked like, but the biggest mistake many older people made was not changing their retirement investment portfolio. As you get older, your supposed to change your portfolio mix from "aggressive" to "conservative" - meaning taking more of your money out of stocks and into safer investments (i.e. bonds, mutual funds). Millions of people never did that.

    "Why is real estate privileged above all other investments?"

    - The real estate lobby is very well funded, powerful and politically connected
    - Since America no longer manufactures anything, real estate has become the latest way in which Americans try to get rich

    "What about renters, who on average are poorer than owners, but who can be evicted if they don't pay their rent?"

    Renters are at a disadvantage economically (they don't get the tax deductions) but are advantaged physically (they have greater mobility).

    Oct. 01 2012 11:53 AM
    mercedes from cortlandt manor

    We help bailout banks, but they can't help bailout the homeowners who took loans from them? Why isn't that bank just the same as that freeloader waiting at the train station for a handout? And yes, we have cheats and freeloaders.. But isn't it easier for someone who is in banking to figure out who that freeloader or cheat is? Isn't it easier for them to figure out who will be unable to pay their mortgage back? Isn't that just "arithnmatic"? Wouldn't the banks have the upperhand if they chose to bailout the community?
    In addition to those cheats and freeloaders, there are people who have lost their jobs and have been on the streets for amost 2 years looking for a job. Thier unemployment has run out. Their mortgages are overdue and some even need food stamps to afee their families. It's time everyone helped everyone and stopped judging whether or not someone deserves a helping hand. Just has "we-the-people" are supposed to have ethics in everything we do, so do banks, wall street, corporations, brokers.. In other words, the money makers and managers. And capitalism. Capitlism has to be tempered with ethics, not just the mathematics.

    Oct. 01 2012 11:50 AM
    BK from Hoboken

    I haven't heard any plans that encourage investors (individual or institutional) to purchase these foreclosed homes. I agree that the foreclosure process needs to move forward (analysis of homeowners in dire situations to determine who really can afford a refinanced or modified loan vs who is simply delaying an inevitable default). However, I would like to see a plan where investors but these home and turn the homeowners into renters of the same property. This continuity keeps people in their neighborhoods, keeps families together, keeps kids in the same schools. With rates so low and values down I know I am looking for investment opportunities.

    Oct. 01 2012 11:49 AM
    Em

    Since this follows on from that "fascinating" discussion on Hollywood, I have one quote for you which helped define the culture henceforth: "Greed is Good." As usual Hollywood wanted to have it's cake and eat it; the supposed bad guy unsurprisingly was actually a hero and icon for the Reaganites and the execrable follow-ons that built this mess. Supposedly liberal Hollywood gave us Reagan, and he was the one who laid off the government scientists and mathematicians who inspired by this ethos flocked to Wall Street and designed the algorithims that caused the sub-prime bubble (and the high frequency trading crash that is still to come.)

    Hollywood is still doing a similar job of romancing Wall Street with Richard Gere's new movie Arbitrage; trying to show us that Financiers are just regular guys with family troubles like ours, being hounded by those annoying police. Yeah right. Well I guess if Hollywood can make the Mafia look honorable, and convince us that Americans were the real victims of Vietnam, anything is possible.

    Oct. 01 2012 11:48 AM
    Peter from Hempstead, NY

    I don't understand why banks sold/pushed mortgages when folks couldn't afford them but now don't give these same folks a chance to re-finance?
    Is it that the rates won't "pay" in the future?

    Oct. 01 2012 11:47 AM
    Karen from Northern Westchester

    What to do: government refinancing, as in the New Deal. 40 to 50 year mortgages, at present value of home, at 3%.

    Oct. 01 2012 11:45 AM
    ben from Saint Paul, Minnesota

    It's soothing words by the far right to suggest that the poor got what they deserve with cheap credit and toxic loans. However, given the circumstances upon what we saw in the banking industry, poor people should not be used as a beating pinata. This economic mess was primarily at the fault of the banking industry, wall street lobbyists, economists from academia and the private sector, the US congress, and local cities regarding code enforcement rules in favor towards real estate developers. We brought the goods to the whole idea on the gospel of prosperity. Never mind being frugal, or having a modest income for a living. We were assuming that everyone was going to be rich at the very end and live like the top one percent. In other words, it was praising the billionaire and screw everyone else. So much for that social contract.

    Oct. 01 2012 11:41 AM
    Mo from from NYC

    People deserve to be treated as adults. None of the bankers are in prison for predatory lending, but Bernard Madoff is serving a life sentence because almost all of his clients were rich (so called victims not adults).

    Oct. 01 2012 11:37 AM
    David from Fredericksburg, VA

    The comment about letting houses go into foreclosure sounds cold, but I think it's the only cure.

    These bad loans are like food poisoning - we need to flush the bad loans out of the system before recovery can begin.

    I'm not at risk of foreclosure but I am paying a mortgage that's almost the full worth of my house (I'd be underwater if I hadn't put down a large down payment). I'd really like to get the housing market going again.

    Oct. 01 2012 11:36 AM

    @Ladyjay,

    The majority of the "new" jobs are paying less because over the years Unions have been squelched which would have protected wages. Unions have been shown to work well (if allowed) with management to come up with solutions (like free training during technological advancements) so that high wages and jobs can be maintained with improvements in productivity.. but what happened instead, Productivity rose over the last 20 years and wages (labor) was not given the opportunity to rise with it. So now we have a technological job shortage and high unemployment with no recourse but to accept lower paying jobs.. if you can find one...

    Oct. 01 2012 11:34 AM
    Sheldon from Brooklyn

    There is NOTHING wrong with a traditional sub-prime mortgage. If your credit isn't the best but you have the income, a bank should be able to lend you a loan at a higher rate because of the risk, as it is theoretically secured by a house - it worked for decades.

    The problem was the fraud and incompetence by banks and our credit rating industries - that our government sanctioned under Clinton and Bush.

    Oct. 01 2012 11:34 AM

    To respond to the call from "Mike":

    I agree that homeowners should be responsible for taking out mortgages that they couldn't afford. BUT the greater onus of responsibility should be put on the banks. The bank is the party who takes the risk because they are the ones putting up the money and its their responsibility for getting it back. It was supposed to be part of banking due diligence that the lending institution assess the risk of the borrower.

    The fact that banks were loaning money to anyone with a pulse pretty much sums up the overwhelming lack of responsibility on their part.

    Oct. 01 2012 11:32 AM

    Yes these adults got loans but on the other side when someone loans you money without a reasonable expectation of being repaid is there really a contract?

    Oct. 01 2012 11:30 AM

    If nothing criminal was done why all the settlements with no admission of wrongdoing that tops 1 billion cumalatively to date?

    Oct. 01 2012 11:29 AM
    Edward from NJ

    Definition of terms: a "subprime" mortgage is a mortgage that can't be sold to GSEs (Fanny and Freddie). That's what makes it subprime.

    Subprime mortgages were *not* sold to and securitized by the GSEs. Private banks bought them and securitized them.

    Oct. 01 2012 11:28 AM
    lj from nyc

    Can anyone explain how someone who put no money down, lied on the mortgage application, then failed to pay the mortgage is a home OWNER? By any definition, this is a squatter. I am 66 year old worker hoping to retire (now later rather than sooner). As instructed, I invested in my retirement account rather than speculating on real estate. I have lost far more value than these "homeowners." Am I going to be bailed out? Why is real estate privileged above all other investments? What about renters, who on average are poorer than owners, but who can be evicted if they don't pay their rent?

    Oct. 01 2012 11:27 AM
    John A

    Detailed description of why laws should encompass morals. Thanks.

    Oct. 01 2012 11:26 AM
    bernie from bklyn

    is this guy for real? the system is basically good? really? nothing has changed since the crisis and nothing will as long as the animals on wall st. have our legislators in their pocket. it's that simple. the system is rotten and most of the people who have been foreclosed upon are idiots who fell for the trick.

    Oct. 01 2012 11:26 AM
    Nick from UWS

    This guy is more than full of it. They "didn't break any laws" because the laws themselves were lobbied and written by the financial industry for the benefit of themselves, so of course no "laws" were broken. What a bunch of shit.

    Oct. 01 2012 11:23 AM
    Karen from Northeast Westchester

    Bernie:

    My point is that many people didn't merely THINK that they could own a home, but actually COULD own a home. Now they are either under water or without significant equity, through no fault of their own. If they continue to pay they are throwing money away, and if they sell, they lose their savings. Moreover, if they lose their job in the recession, as many have already done, they lose the house. If people could own homes without working, they wouldn't have a mortgage in the first place. Are you suggesting that nobody get a mortgage who doesn't have cash to pay for the house?

    Stop blaming the victims and look to the source of the problem: the banks whose irresponsible, dishonest lending policies brought the system down on the heads of the responsible and irresponsible alike.

    Oct. 01 2012 11:23 AM
    Edward from NJ

    The problem with the foreclosure process as it stands is that the banks evict people and then let houses sit vacant. This doesn't help the value of the particular foreclosed properties -- which are left to deteriorate -- or the real estate market in general.

    Oct. 01 2012 11:22 AM
    jgarbuz from Queens

    I have explained why the owners of capital (i.e., the "top 1%") have a marked advantage over the owners of nothing but their labor (the 99%). Capital can easily flow anywhere in the world where it can get higher returns. Labor is restricted. It is difficult to emigrate to other countries to get their jobs.

    In addition, most countries have low tax rates on investments, which is why capital gains taxes are so low in the world, and in the US. Here it is 15%. In Israel it is 0%, but taxes on everything else in Israel is astronomical by American standards.

    Countries want capital more than they need labor. So they attract capital by offering very low or even 0% taxation on capital investments. That is why the 1% gets richer while the 99% stay in place, or even sometimes go down.

    Oct. 01 2012 11:21 AM
    Sheldon from Brooklyn

    Ah yes Mr. Santelli, I also didn't want my tax money going to bail out arrogant, imcompetent bankers either.

    Oct. 01 2012 11:20 AM

    @Martin:

    The statistics are true, but you are not analyzing WHY the incomes have decreased:

    - the number of retirees continues to increase. Older workers are leaving the workforce - either voluntarily or through company buyouts

    - the majority of new jobs created are paying less due to increased competition

    Oct. 01 2012 11:19 AM
    Marc Anders from Manhattan L.E.S.

    As long as you're going to discuss what I call "The Santelli Fallacy", I'd like to hear - in more detail then the speaker is giving right now - that many of the so called "losers" were deliberqately swindeled into taking mortages that would blow up in thier face by salesmen who were being paid Extra Borwnie Bonus Bucks supplied by securitizers like Goldman Sachs for sales of the worst (and therefore) highest yield mortgages possible.

    Oct. 01 2012 11:19 AM
    bernie from bklyn

    didn't they all get what they deserved? people who ignorantly thought they could own a home and the greedy, sociopathic banking industry that sold it to them....both guilty.

    Oct. 01 2012 11:18 AM
    Vlad from Central N.J.

    Here is a graph that illustrates the debt problem we currently have,

    http://www.the-crises.com/wealth-inequality-in-the-us-1/

    Oct. 01 2012 11:17 AM

    at the time i agreed -- "get to the bottom as quickly as possible."

    but simultaneously employ Universal Health Care, wpa style Work Projects and other ways of helping people to cope with a changed world.

    Unfortunately Obama hired Bush's henchmen so we've been sidetracked. Since 2000, by the way, not 2006.

    Oct. 01 2012 11:12 AM
    Matt Smetana from Sparta, NJ

    Why do foreclosed homes sell for so much less then their equivalent market priced homes. Why couldn't foreclosed homes be sold at market value, and either give the additional value to the former owner, or some shared value between the bank and the former owner. In my oppinion the dramatic drop in values was caused by this discrepancy between actual value and sold price. This caused more people to forclose because their values were less then they owed, and it made sense to abandone it.

    Oct. 01 2012 11:10 AM
    Karen from Northeast Westchester County

    Let me add a slightly different point-of-view. In 2005, my husband and I sold our co-op in NYC and bought a home in Westchester County. The home cost considerably less than our profit on the apartment, but we put all of that profit into equity. We also improved the home, which was almost 50 years old, installing a new kitchen, new baths and an energy-saving heat and hot water system. We had a considerable investment in the house -- about 2/3 of our savings -- but weren't worried, because we had lots of equity, over 50%, and figured that the improvements made would increase the home's value. All we had to do to pay our mortgage was keep working.

    Our home is now worth $300,000 less than we paid for it. If I sold it tomorrow, I would lose 3/4 of our equity. While not "under water," we have gone from middle-class, middle-aged people with a secure retirement investment, to nail-biting neurotics, wondering what will happen to us if I lose my job. (I won't find another; I'm over 55.)

    Moreover, we tried to refinance our ARM to guarantee a lower rate, but ran into difficulties because, although I earn a good income, my husband is self-employed. So now, with an ARM, we are also at the mercy of inflation.

    What will happen to all of us middle-aged folks who did the right thing with their money, are not under water technically, but have had their equity wiped out by the recession? What do we do now?

    Oct. 01 2012 11:07 AM
    Martin Chuzzlewit from Manhattan

    .....and how will these homeowners dig themselves out of this mess?

    "Americans’ Incomes Have Fallen $3,040 During the Obama ‘Recovery’"

    "The median annual income of American households was $53,718 as of June 2009, the last month of the recession. Now, after 38 months of this “recovery,” it has fallen to $50,678 — a drop of $3,040 per household. Yet it gets worse. Amazingly, incomes have dropped even more during the “recovery” than they did during the recession. In fact, they’ve dropped more than twice as much as they did during the recession."

    http://www.weeklystandard.com/blogs/americans-incomes-have-fallen-3040-during-obama-recovery_653116.html

    Oct. 01 2012 10:21 AM
    Tanya Dwyer, Esq. from New York, New York

    NY Homeowners can help themselves by being proactive when they receive foreclosure litigation papers. There's only so much defense attorneys can do for those who don't respond to the lawsuit AND don't qualify for a mod. The best thing for people to do is to go to legal aid ASAP and ask if they qualify for assistance or request a list of defense attorneys near them. They can also go to the Courthouse and put something on the record to preserve their rights. Not responding to the lawsuit within the first 20 days is the worst thing a homeowner can do when they aren't sure if they qualify for a mortgage modification. Their best defenses may expire after the first 20 days along with their ability to use them as leverage in foreclosure settlement conferences. Sympathetic situations will not change the rules.

    Oct. 01 2012 10:13 AM
    Bail out homeowners & banks would survive. from Trickle UP not trickle down!


    Putting banks in charge of renegotiating loan
    terms is like putting the mob in charge of the police.

    Obama should DIRECTLY intervene.
    If you save homeowners DIRECTLY, you will reduce foreclosure.
    This will boost the local economy and prevent further
    depression of surrounding home values (aka : economic contageon).

    By trickling UP the govt could save the homeowners from
    foreclosure and this would have save the banks.

    But Obama chose to TRICKLE DOWN.
    We all know - from the last 30 years - how poorly that works.

    Sep. 27 2012 12:55 PM

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