Getting tired of all the feel good articles that explain how to avoid foreclosure? These things are published right and left, all over the web, tv, and print media, but who actually reviews them? Let’s do it.
One was posted on MSNBC today (here):
Sidestep landmines that can lead to foreclosure. If you’re struggling to stay afloat, here’s some help — and resources.
1. Face the problem head-on. Have you fallen into the habit of throwing all the ominous-looking mail you’re receiving from your mortgage lender into a big pile – and then not opening any of it? If so, snap out of this state of denial pronto! ….
This is good advice, but if a troubled borrower is reading the article, then obviously they are trying to face the problem. Rather than offer a real tip for those interested in saving their home, this top ten list (like so many others) implies that the problem is with the borrower. Most of the articles begin with this gem and it is just pathetic.
2. Contact your lender and explain your situation. This step may scare you to death – but do it anyway. Here’s why: Depending on your circumstances, your lender may reduce your interest rate, lower your monthly payment to make it more affordable for you, or agree to a repayment plan for any payments you’ve missed….
Good advice again, sort of. I have heard lenders do reduce interest rates or something real in a small, tiny, fraction of cases, but your odds are better playing the lottery. [The odds may improve a little more if the feds pass a "housing rescue" bill. More on that later.] Of course, the biggest obstable to contacting your lender is — contacting your lender. First off, who the hell is your lender? It depends on who you ask. The real advice is to contact the lender’s servicer — the collection agency of the lender — completely different from the lender. The loan may change hands and the loan servicer sometimes changes with it, sometimes not. Sometimes servicers change when the loan begins to default. Check MERS for who the servicer is if there is confusion. That is a real tip.
Has anyone that writes these stories ever called a servicer when an account is in default? Getting through to a human that has more information than a telemarketer reading from a script is quite a trick (because the people that answer the phone seem to me to be telemarkers reading from a script). If you call the servicer more than once and get through, you won’t talk to the same person of course. Whatever you told the first telemarketer was reduced to a few codes and phrases and entered into their computer system. The second telemarketer may read those notes and may or may not garner something from your previous conversation, and the fun goes on and on. Just call — it is easy, fun, and not likely to actually work unless you are one of the fortunate few that the lender (aka “investor”) has decided to help or you can come up with chunks of money to the satisfaction of the investor. And getting something in writing from them confirming the “deal”? You got to be kidding.
3. Understand your mortgage rights. As unappealing as this task may seem, dig out that pile of loan documents you received when you bought your home. Start scanning them for the answer to this question: What can your lender do to you if you’re unable to make your mortgage payments?
Give me a break. Who can read and understand all of those provisions, besides a lawyer trained in the area? The bottom line is that the lender thinks they can foreclose and will attempt to do so and the only way to stop it may be to work something out, file suit or bankruptcy, refinance, sell the home, or walk away. This advice is another standard line that people write for articles. “Read the contract” they say, like that is really going to help. This kind of advice is just trying to put the person in their place so the advisor can close the conversation and sneak out the back. I think this advice runs counter to facing a problem head on (as suggested in #1) — reading the fine print in the stack of documents will do little more than frustrate, annoy, and confuse an average lawyer, much less an average borrower facing foreclosure.
3. Continued … Being armed with this information will equip you to have smart conversations with your lender about your situation. You also need to learn about the specific foreclosure laws and time frames in your state. Contact your state government’s housing office or department to find out which rules apply where you live. To track down the correct agency, do a quick Internet search for the name of your state along with the words “state government housing office.”
Silly advice. State government is not the place I would suggest to get information on foreclosure laws and time frames. State government is not responsible for knowing all the applicable laws. Some state agencies might be helpful, but if you want to know about the law, contact, hmm, who advises on the law? I remember, it just does not come to me right now. Anyway, if you have a pain in your shoulder, you should contact the state medical board, because they are knowledgeable in the area and are well-equipped to assist people with such matters.
4. Consider selling your home. This may be one of the most painful decisions you’ll ever make, but it could be the right decision if you were sold more house than you can afford. Selling your home on your own terms sure beats having your home taken away from you, and money from the sale could cover your mortgage debt and selling costs in full….
This might be good advice especially if there is equity in the home, and is a good tip to avoid a foreclosure. But, seems a bit on the last resort side (at #4 on the list). Also, most people do need a place to live, so selling can avoid foreclosure but it might not solve a slightly bigger problem — homelessness. Certainly people should keep this in mind, but selling is probably not #4.
5. Explore the “short sale” or “deed in lieu of foreclosure” options. Let’s say your house can only be sold for a dollar amount that’s less than the amount you still owe on it. If that’s the case, your lender may agree to a “short sale” – that is, it will take what you can get for the house and forgive the rest of the balance owed. Or, if you simply can’t find anyone who wants to buy your home, your lender may agree to a “deed in lieu of foreclosure.” …
Again, this is a last resort to prevent defficiency judgments and other negative effects of foreclosure. Not exactly #5 on a decent list. In Texas and some other states, short sales or DILs are not even important because defficiency judgments are not pursued as a policy decision by lenders (aka “investors”) in my experience for reasons I won’t explain here.
6. Don’t give your money away to the wrong people. You very well may be approached by foreclosure-prevention companies that will offer to negotiate with your lender on your behalf. Don’t take the bait! In the best-case scenario, the company will be a legitimate business but will charge thousands of dollars for help you could get for free….
7. Seek out legitimate help. Considering how many con artists have emerged during the mortgage meltdown, it can be difficult to know where to turn. Here are some options to try that aren’t scams:
Good to know that there are scams out there. More good advice — go get good advice. Of course, if you notice all the links point to the same people: credit counselors. It looks like there are tons of people to help. Nope. There are credit counselors and attorneys and that is it. I guess MSNBC does not want people going to attorneys so much. I think HOPE feels the same way. Ever looked at the board of the Homeownership Preservation Foundation? ‘Nuf said.
8. Set financial priorities that fit your current circumstances. When you’re feeling absolutely overwhelmed financially, it can be difficult to know which bills to pay first. Here’s the main thing to keep in mind: Keeping your home – or walking away from your home on your own terms and avoiding foreclosure – should be your top priority.
Budget. That is real good advice (at #8). Finally.
9. Consider filing for personal bankruptcy protection. This is a last-ditch tactic to be sure, but it may be better for you than a foreclosure. With a foreclosure, your home will be taken away from you, your credit rating will be seriously damaged and you’ll still be saddled with all of your other debts. All of this can make it very difficult for you to find housing again – including rental housing. A bankruptcy filing also will hurt your credit rating for years to come, but here are the key differences: You’ll be solvent and debt-free, and with a Chapter 13 bankruptcy you may get to keep living in your house.
Good advice as well, mostly. Well except for most of the advice. “Solvent and debt-free”? Not sure. Chapter 13 can discharge some debts, but it certainly cannot wipe out the debt on the home unless the borrower wants to give up the home. And yes, the borrower gets to keep living in the home so long as the borrower keeps making the payments on the home as they come due and keeps making the bankrutpcy trustee payments (and does other things required by the court). The problem with bankruptcy is that you have to be able to afford it — it will not save every home to be sure. Of course, if this was a vacation home or second home, a borrower could ask the judge to reduce the interest rate on the loan or change some other term to make it affordable, but bankruptcy courts no longer have that power on primary residential loans. Wonder why that happened? And Congress is not likely to change that law either any time soon.
And last, but not least …
10. Maintain your self-esteem. Try very, very hard not to panic or beat yourself up right now. This is a time to stay sharp, take charge of your situation and stick up for yourself. Remember that you’re certainly not the only homeowner in America who’s struggling right now. Direct your anger and negative emotions toward people who may deserve it – say, for instance, a predatory lender who may have deliberately locked you into a bad loan.
Pathetic. Why not mention a healthy diet, exercise? Maybe we should encourage people to avoid being sad the rest of their lives? Why limit this advice to borrowers facing foreclosure? Okay, harsh criticism of a feel good article. Of course that is the point — call this article what it is — a feel good article (not one purporting to be strategies to avoid foreclosure). But, I am afraid that a troubled borrower will not feel that good after reading it.
Filed under: Advice for Borrowers, National Foreclosure News
Don’t hold back Doggett. Tell us what you really think. :)
Nice job.
[...] Check it out. [...]
I wish “consider bankruptcy” were higher on everybody’s list. As you point out, the homeowner has to be able to afford the mortgage and the Chapter 13 plan payments. But sometimes a sharp attorney can find things wrong with the loan that provide leverage for negotiating a change in terms even though there’s presently no RIGHT to force a change in a purely residential mortgage. The bottom line is that, if the foreclosure sale is set for less than two weeks from today, chances are that the only thing that will stop it and isn’t a scam is a Chapter 13 filing.
Thanks Robert! Did you post your comment to Msnbc’s Story Discussion? If not, you sure ought to.
It bugs me so much tthat these “help” articles never suggest early on that consumers contact a lawyer.
[...] Robert Doggett, a Texas RioGrande Legal Aid attorney, writes about foreclosure news and attempts to dispel common myths about what you should do if you are facing a foreclosure. Robert, great job! Keep it up! – [...]
Lead Hsg Atty, Legal Aid San Diego–20 yrs.tenant rep.
(Prior 9 yrs hard-money broker/lender & in private practice landlord side).
You told it like it is! Great job deconstructing the “feel good,” basically impractical & useless-to-our clients article, if they’d even see it! We have our pulse on what’s happening here in San Diego, and do the post-foreclosure eviction defense, run courthouse eviction answer clinics, attend community meetings, attend bbbds on line, etc. It sounds like your experience. We can’t evenget pro bonos to do the predatory/RegZ/RESPA etc violation litigation.
I like how you broke down that article… :)
I thought most people who end up in this situation are filing Chapter 7 bankruptcy? Since the lenders carry much of the blame here, but not all, and everything is in full blown deleveraging mode now, what happened to the idea that the original mortgage contract had to be produced to a Judge to proceed to a foreclosure order on a residential property. About 80% of the time, whoever is processing the foreclosure can’t do that, because the “paper” derivative has traded hands so many times, and they often don’t even know who originally wrote the motrgage.