Avoiding Foreclosures with Common Sense
I wanted to share an example of how one area of avoiding foreclosures would help homeowners, which I don't believe the lenders wish to do, actually. We have a 15 year fixed loan with GMAC, investor Fannie Mae. Over the last several months, due to two job losses between my spouse and myself, I have requested GMAC to consider letting us change to a 30 year vs. 15 year. We could keep current if allowed to use this option. No go. I was told to default and maybe they would work with us, key word maybe, not to mention destroying our credit. Recently, Fannie Mae has implemented an early workout program for homeowners current on their loans but stressed financially. GMAC claims to be working with Fannie Mae, and yet, I have sent in all documentation for this program option and still, here we are with no reply. I called again yesterday and was told I would hear something in 3-6 months. It seems sanity and common sense are lost in these trying times. We are in CA so refinancing is not an option, even if they were lending, as everyone where I live has seen their house values drop, in our case from $550k (silly, I agree) to $195, maybe. Just wondering if any one else has encountered this type of stonewalling. Best to all.
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Amelie -
I'm stunned to read this. I worked for many years for a large Colorado community bank, and our senior officers who made it through the S&L crisis did just what you requested in your situation. It's in the banks interest as well, and it's good for the community. One conceivable reason they won't work with you is they aren't sure themselves where the government will go, so they're sitting and waiting. Why can't they do the right thing now?
Have you called your local newspaper? faxed your Congressperson? Maybe go to their office? (Your Senators are no doubt already on board).
February 8, 2009 11:50 AM | Reply | Permalink
I have written to quite a few, posted a lot on blogs. I am very disheartened right now, so I am going to hit the phones again in a few days. I believe what has happened is, due to the large amount of defaults, the banks are addressing those and are so overwhelmed that cases like ours are put on the back burner. I will again contract our representatives though, that is a good line to pursue. Thank you.
February 8, 2009 3:54 PM | Reply | Permalink
I think Fannie Mae's program starts April 4, which might be part of the reason GMAC is dragging its feet.
FHA has a program called HOPE NOW that, among other things, offers HUD-certified counselors that can serve as liaisons with your lender.
For what it's worth, I have a GMAC mortgage and I wouldn't want to tangle with them alone.
February 8, 2009 12:12 PM | Reply | Permalink
HopeNow may not be as hopeful as it seems. Last time I checked they only had about a hundred applications and had not achieved a single successful workout.
One problem is the upside down pricing. Not much incentive for anyone to try to figure out how to pay $550 k for a house that wouldn't sell for more than $195. The good business decision would be to abandon the place, take the credit hit and move on, but that just drives prices lower and contributes to the overall problem.
We need to find some way to cut down the number of houses on the market (and hint, holding a bunch of empty/boarded properties is not going to do the trick.)
February 8, 2009 12:21 PM | Reply | Permalink
Thanks, erica. All I know is I had to deal with GMAC on a simple escrow issue and it was like walking to hell on hot coals.
February 8, 2009 12:37 PM | Reply | Permalink
GMAC is impossible. Truly, it is like a maze that never ends, and no one has answers. We owe around 300k on our house, so we are not as upside down as others, but still, it is a mess. HOPE NOW has been worthless, unfortunately. If you search the blogs for people with GMAC loans in our situation, you'll read horror stories with no end result.
February 8, 2009 3:58 PM | Reply | Permalink
Confirmed. This is what banks do. I am unaware of any cases where banks will perform a meaningful workout for anyone not behind on their payments.
By any chance is your loan guaranteed by Fannie Mae? If so, the bank has absolutely zero incentive to modify or rewrite your loan; they can wait until you give up and get foreclosed on, then collect the full amount of principal plus interest from Fannie Mae, by extension from the US taxpayer.
I twice had fascinating conversations with people from Fannie Mae who seemed absolutely scandalized by the notion that Fannie Mae ought to put pressure on banks to do the best they could to work with customers and allow them to stay in their houses. A direct quote would be: "We're just the investor. We can't tell the banks what to do."
One problem is the sacredness of the pre-existing contract. The bank (or in this case GMAC) loaned you a bunch of money and they have a solid claim on getting it paid back according to the terms of their original contract. Then, they're sort of practically prevented from cancelling or rewriting the original contract by the fact that they may have securitized your loan and sold it to a bunch of parties who credit default swapped the living daylights out of it. Big whoops on their part but hey, who knew, right?
They (and their lobbyists) would rather pretend that you're the one who made the mistake by buying a house in a neighborhood you wanted to live in, at the going rate and with their approval/appraisal, between 2001 and 2006. You deadbeats, you! :^)
For all these reasons, I've maintained for some time that the "bailout" should come in the form of a payment-sharing plan for people in the hardest-hit neighborhoods. Call it a part time job, and the job is to stay in your house. The banks would get their money, but it would go to ordinary people first.
For some reason, this plan, though sensible, goes nowhere with the folks who would rather see a slew of bankruptcies, foreclosures and massive neighborhood decay rather than bail out people who had the nerve to buy overpriced houses between 2001 and 2006.
Strange times indeed...
February 8, 2009 12:16 PM | Reply | Permalink
I was not aware of the guarantee issue. I had a hard time even finding out the investor is Fannie Mae. Does that mean they guarantee it automatically? You are right, there is no incentive to help us. None. What is most appalling to me is that this issue is not being addressed as part of the the stimulus package. Thank you for your informative post.
February 8, 2009 4:15 PM | Reply | Permalink
BTW, I called Fannie Mae, and they said, surprise, we don't want you to default, but we cannot tell the bank what to do. You are so on point.
February 8, 2009 4:18 PM | Reply | Permalink
Well, aren't you just a dear to say so, because many others have told me I'm a crazy woman on this whole foreclosure thing. Much appreciated.
The concept that ordinary people who bought homes and/or investment properties between 2001 and 2006 are in big trouble, as is anyone who has to try to sell a home anywhere, just hasn't percolated through the American consciousness for some reason.
I think this is because people facing foreclosure have been depicted either as hapless victims of predatory lenders, as scofflaws who cheated on their applications, or as greedy players who tried to get something for nothing by buying up multiple properties using interest-only loans. (If they are, then I wonder what sort of multiplier of evil would have to be applied to those who created, sold and bought credit default swaps, essentially securitized bets against peoples' ability to pay their mortgages.)
By the way Amelie, if you would be willing to come forward and talk on the record about your situation, there is at least one reporter at pro publica who might be interested.
February 8, 2009 8:23 PM | Reply | Permalink
Erica -
Great post, as you've hit the nail on the head with the contract issue. FNMA failed early last year! There has been plenty of time for management to figure out how to direct their issuing banks to do workout deals, but instead they're waiting with their hands out. There just hasn't been political pressure to do so. When FSLIC took over delinquent S&Ls or sold them to stronger banks, that is what they required the banks to do. That is what is appalling to me.
February 8, 2009 12:40 PM | Reply | Permalink
Amelie,
I have referenced this post in a blog of mine and that may bring a number of people to yours. I hope so.
What you are experiencing is part of a larger problem in our society. People are being punished right and left - for problems caused by fancy financiers, who expect to be bailed out, while WE the People, are asked to economize and downsize and go without, to enable them to continue on with their mansions and their perks of every type.
Thanks so much for this blog.
February 8, 2009 4:01 PM | Reply | Permalink
Thera, as always, you are so helpful and supportive. Actually, I feel better just knowing people actually care. All the best.
February 8, 2009 4:16 PM | Reply | Permalink
Just a side comment on reaching people at GMAC - one of our newer underwriters came to us from GMAC in late 2007 - they were already laying off support staff as well (phone banks, customer service, etc) as the first waves hit them. Basically, they didn't keep the staff to handle the volume. This is going to require Federal efforts and intervention. After directly witnessing what the FSLIC and FDIC required, what community banks and bank officers did in the S&L crisis, this can be done right - so it helps communities, lenders, and borrowers alike.
February 8, 2009 5:17 PM | Reply | Permalink
Amelie, please contact Barbara Boxer, Diane Feinstein, your local House Rep and as many of the non Californian Senators and House Reps as you can stand listening to- if you watch C-Span and have observed, as I have these last several days, a lot of paint drying along with a very few sparks flying. Congressman Barney Franks of Massachusetts ought to be interested in your story, just to mention one name, because he has his heart in the right place and he is one smart guy up there on the Hill. Have you written to the new President?
I hope your situation changes, and soon.
L.
February 8, 2009 5:57 PM | Reply | Permalink
Thank you for all the good ideas and comments, much appreciated!
February 8, 2009 9:04 PM | Reply | Permalink
I just spoke with Fannie Mae. As they are the investor of our GMAC loan, and they guarantee that loan, GMAC has absolutely NO incentive to help us since they are covered. Essentially, everyone wins if we default except the taxpayers who paid for bailing out Fannie Mae. FM also told me they has no control over GMAC in making them work out anything with us, go figure.
February 11, 2009 2:37 PM | Reply | Permalink
I just spoke with Fannie Mae. As they are the investor of our GMAC loan, and they guarantee that loan, GMAC has absolutely NO incentive to help us since they are covered. Essentially, everyone wins if we default except the taxpayers who paid for bailing out Fannie Mae. FM also told me they have no control over GMAC in making them work out anything with us, go figure.
February 11, 2009 2:38 PM | Reply | Permalink