foreclosure homes

"That's a very good thing," said Thomas Lawler, an independent housing economist in Virginia. But he noted that even with that positive trend, "you are highly likely to see an acceleration in the number of actual completed foreclosures."

Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.

About 25 percent of the 1.2 million homeowners who started the program over the past year had received permanent loan modifications as of April. About 23 percent of those enrolled dropped out during a trial phase that lasts at least three months. Many more are in limbo.

Among states, Nevada posted the highest foreclosure rate in May. One in every 79 households there received a foreclosure notice. However, foreclosures there are down 16 percent from a year earlier.

Arizona, Florida, California and Michigan were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Idaho, Illinois, Utah and Maryland.

Las Vegas continued to be the city with the nation's highest foreclosure rate, but activity there was down 18 percent from a year earlier. And nine out of the top 10 cities with the highest foreclosure rates posted annual declines. The exception was the Vallejo-Fairfield area in California, where foreclosures were up 1 percent from a year ago.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties. That's a concern for local communities, and a drag on the economic recovery.

In recent months, home prices have started to sink again after stabilizing last summer. Economists at Goldman Sachs predicted in a report last week that prices will fall about 3 percent nationally over the next year, with the largest declines in cities where mortgage defaults are rising.

"The housing market remains plagued by enormous excess supply," wrote Goldman economist Sven Jari Stehn.

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My business cratered in 2008, followed by a huge loss on a particular project and a tax issue. This all followed on a couple bad years and a couple refinancings on my place. Come the end of 08, I stopped making payments on the mortgage and started sliding sideways into foreclosure and default on the overextended credit card, all the while having next-to-no work coming in.

I economized and gutted it out, managing to keep the lights, heat, and phone on, gas in the car and cadging food and such as I could. I became expert in sussing out when the supermarket would be putting almost-expired chicken on sale for 59 cents a pound. Living in a city, I was able to walk a lot of places and economize further.

After about 6 months of this, I grew tired of the constant phone calls both from bill collectors and from people trying to sell me one flavor of debt salvation or another. I’m a lawyer and I know that most of those schemes were not worth the money, assuming I had the money in the first place. I decided to sell out because even after a couple refinancings, I still had some equity in the place.

All the while, the creditors were trying everything.

The mortgage company and the credit card company tried every line: angry, pleading, appeal to morality, making one feel guilty or ashamed for not paying, you name it.

If it was Bob With The Indian Accent and obvious intercontinental connection, I told him I didn’t understand him and that I had to hang up. Other cases, I’d tell the guy I’d pay when I could. To the inevitable followup question “When do you think that will be?” I’d answer “I don’t know but you’ll find out shortly after I do.”

They would try, try, try to get me to make a promise to pay. Falling into that trap is a bad idea for the debtor for two reasons. First, it can (and a creditor will construe it as) a “novation” of the debt, that is to say, an entirely new contract affirming (and admitting) the validity of the debt. It’s a variation on the scheme Sears used to play with people who got their Sears card debts discharged in bankruptcy and who Sears later approached to try to collect on it anyway. Second, it opens the debtor up to the emotional appeal of not wanting to break your promises and will be used against the debtor that way.

To all that, I would answer “how can you expect me to make you a good-faith promise to pay you this debt when the circumstances that put me in the position of getting phone calls from you have not changed? How can you come to me and tell me that it’s OK to make a promise to pay, when I don’t have the means to do that?” and similar logical flips. I would stick to my positions and let the bill collector do all the arguing.

When they wanted to be my friend, I’d remind them “you’re a bill collector. You are not my friend. You are not trying to help me. You are trying to take money from me – food out of my mouth – so as to move the odometer on this debt. That’s all it is – an odometer. Just numbers that have no relation to reality or anything. you want me to move the numbers in your favor, when I can either eat and make sure the dog is fed or move the numbers in your favor. If our positions were reversed, what would you do?” Not a few times, the collector admitted he’d be doing pretty much the same as I was.

I felt no guilt about taking up their time. If they were working on an hourly wage (highly unlikely), then I was making sure this guy got some hours in and got paid while getting nothing to the employer paying him for it. Screw the employer. If they were working on a percentage of recovery (much more likely) and weren’t bright enough to recognize they were wasting their time with me, well, screw them. Their problem, not mine.

In all things, I was unfailingly polite. I recognized and kept in mind that these were peons trying to do a nasty job, quite probably the only job available to them. “Do unto others…” is something one has to work on all the time. I also knew that they were recording whatever went on, so making a promise or blowing up or making a threat or whatever would be there and pointed at, time and again, for whatever purpose.

The one time, one of the collectors blew up and flew into a tirade about how he hated lawyers and how he hated how we thought we were above the law and a whole panoply of personal insults. I flew back at him and told him to go fuck himself. I then took the time to calm down and straighten my head out first. Then, I called the credit card issuer – they had sent the debt out to a collection agency – and spoke to someone. Since they had shipped this out to an agency, they tried to demur and send me back to the agency. But I reminded them the debt was with them and, more importantly, their agent was violating the law. That’s the Federal Fair Debt Collection Practices Act.

When you start waving the FDCPA around, creditors sit up and listen. I worked my way up the chain of supervisors until I reached, I believe, a senior vice-president at the creditor. I explained to him the situation:

I knew there was a problem with the credit card,

I had issues with the way his company had handled it (independent of the collection agency) which left me ill-disposed to view his company as my friend (despite a long, good relationship),

I had serious issues with the illegality of the collector’s conduct,

I admitted and apologized for my blowing up and profanity,

I’m a lawyer and I know all about the FDCPA,

I don’t want to go down the lawsuit road though I easily could and would win.

Having thus set the table, I then told him what I wanted was that I wanted that bill collector fired. Because if he’d done that to me there was little doubt he’d done it to others and he was a litigational ticking time bomb waiting to tear into both his company and the collectors. I then repeated that I could not now pay, but would in the future.

In other words, I dealt with a sensible, sophisticated, professional person in a sensible, sophisticated, professional way.

I didn’t get Mr. Abusive fired, but I got no collection calls for a couple months and none from him for a good six months.

This went on all summer while I was listing and showing the property and going to contract. When the mortgage company filed the foreclosure suit, I waited as long as I could, then filed an answer asserting they had no standing to sue – the documents had been run through the MERS and there was all sorts of assignment language. This bought me months through the legal procedure while I managed to bring the contract to the point of a buyer with a mortgage committment coming. Another six weeks and we closed the sale. The mortgage was paid off, the other debts that had liened the property were paid off and title closed.

I had the good fortune of having lived in a desirable neighborhood that had not suffered a big decline in value and equity in the property and a buyer who wanted the property because it really made an improvement in the work commute; I managed to walk away with some money.

As to the credit card debt, which was not secured by the property, I held out on them. Ultimately, they offered to take 40 cents on the dollar and I paid them the same afternoon.

In the course of economizing, I lost something on the order of 15 or 20 pounds, the result of stress, cutting out beer and ice cream (and just about anything else other than the cheapest staples I could find or cadge) and making sure my money was allocated so the dog got fed first. I went on a vacation – paid for by a friend employed in a good job and repaid by me after closing on the sale. I avoided bankruptcy. I was too broke to go bankrupt (and I didn’t want to prepare, let alone file, the schedules, nor to go through the required debt counseling – a sick joke that favors only the creditors).

The NYT article linked is aimed at propagandizing a specific audience – the judges, lawyers and financilists on the institutions’ side of the foreclosure debate. They’ll read this and every contesting defendant will suddenly be running around in the gas-guzzling airboats, just like every welfare recipient was driving down to the welfare office in their new Cadillac after Reagan said so.

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