Archive for Psychology of Foreclosure

Paramilitary SWAT Teams Now Enforcing Eviction Orders

As local American police forces have become more and more militarized, with weapons grants from the Department of Defense and militarized Keynesianism popular in Washington, DC, it should come as no surprise that even foreclosures are turning into SWAT team-appropriate events.

OregonDOT

© OregonDOT – flickr

The American Free Press has an article out today on a case in Idaho Sprints, Colorado, involing 22 SWAT officers loaded to the ears with military weaponry. What were they doing? Catching a serial killer? Taking down a mass murderer? Saving children from another of the TSA’s monsters?

No, they were enforcing a court ordered foreclosure seizure of a family residence. As the article states, “On October 30, the Clear Creek County, Colorado Sheriff’s Department dispatched 22 SWAT officers—decked out with military-green helmets and uniforms, fully automatic weapons and numerous other “bells and whistles”—to enforce a court order for a U.S. Bank foreclosure on the home of Sarah Donahue.”

The justification for the overwhelming show of force was, of course, to keep the officers “safe.” However, in the interest of total officer safety, the next logical step is for the local police to call in a drone strike to destroy the house completely, while fleecing the local taxpayers to cover the cost of the house.

After all, the taxpayers can pay the bank for the destroyed house, the officers can remain at a safe distance while never having to come into contact with those they “serve” and “protect,” and the federal government can hand out more defense contracts to drone agencies. And finally, with one more house destroyed, prices can only rise as a result of decreased supply, right? Everyone is a winner with militarized police agencies enforcing evictions.

Now, the homeowners who defaulted on their loans should have to face the consequences of such an action. That could involve having to pay back more, or negotiating with their lender for a loan modification of some sort, or simply leaving the property to foreclosure and dealing with the consequences of poor credit. However, they should not be forcibly evicted by a paramilitary organization within their local police force.

What You Pay for When You Hire a Loan Modification Company

Many homeowners do not really understand what they are paying for then they send out a few thousand dollars to a company or law firm offering loan modifications. Too often, they believe they are paying $3,000 for a guaranteed reduction in their monthly payment, interest rate, and principal due on their loan. But the reality is that homeowners are mainly paying for convenience — not a guarantee of any sort.

©Robby Virus - flickr

©Robby Virus – flickr

In fact, loan modifications are not even that difficult to negotiate. The whole process may take a total of five hours of actual negotiation between the homeowners (or their representatives from a law firm or loss mitigation company) and the lender (or its representatives from a servicing company or foreclosure law firm). In most cases, this can all be done easily enough just between the borrowers and the mortgage company.

However, the few hours of actually speaking with the loss mitigation department of the servicer and getting all of the proper instructions in place to move forward with the loan modification is surrounded by potentially dozens of hours of bureaucratic nonsense and inefficiency. As soon as borrowers begin negotiating with their bank for any kind of workout solution, they can expect to run up against the following roadblocks:

  • Multiple-hour long hold times per phone call
  • Numerous disconnected phone calls after long hold times
  • Phone calls are sent to voice mail boxes which are full
  • Voice mails left with non-full boxes are never returned
  • Faxes sent to servicing company are lost
  • Faxes resent to servicing company are lost again
  • Law firm is unable to create consistent payoff statement for loan
  • Law firm needs information from lender; lender needs information from law firm, creating multi-day delays for any information

This is what turns a 90-minute loan modification negotiation into a three-month nightmare of being on hold, not getting phone calls returned, faxing information to the lender, and waiting as more interest, late fees, and legal fees are added to the account everyday. Wading through the lender’s inefficient business practices is the main value a foreclosure assistance company can provide to homeowners attempting to stop the process.

This value offered by loan modification companies is even more important when it is found that they did not provide any services to borrowers. When a mitigation company is exposed as a scam, it is often due to the fact that it never contacted the lender or opened negotiations for a workout solution. As soon as the borrowers find out that they have been conned, they file complaints about not having been able to save their homes.

But the saving of the house is almost secondary to the real service these foreclosure help companies provide. If the homeowners do not really have the financial means to qualify for a solution to foreclosure, the lender will simply turn them down. As well, if the Pooling and Servicing Agreement (PSA) states that only a certain number of loans may be modified, the borrowers may just be out of luck according to the terms of the PSA contract.

Thus, homeowners need to understand that, when they give a loan modification company thousands of dollars, they are not paying to “save their home.” They are paying mostly for the convenience of not having to wade through dozens of automated phone systems just to sit on hold for hours a day and ultimately leave voice mails that will never be returned. Loss mitigators can also offer proposals that are reasonable for banks and borrowers and present them nicely, but the main value they provide is saving homeowners time and frustration during a very frustrating experience.

How to Stop Foreclosure – Trust Your Instincts and Learn How the Process Works

Whether homeowners work on stopping foreclosure on their own, with a trusted attorney, or by hiring a specialized loss mitigation or foreclosure assistance company, there are a few issues that every borrower should be aware of to prevent against scams and have the best chance of success. These include trusting their own intuitions and learning the most important aspects of how foreclosure works.

©David Castillo Dominici - freedigitalphotos

©David Castillo Dominici – freedigitalphotos

Using common sense and trusting their own instincts is probably the most important part of saving a home from foreclosure in the most efficient manner possible. There are far too many stories of people taken advantage of by a foreclosure scam who mention that they were apprehensive about working with a company or individual but went ahead anyway.

It may have been the fact that no one answered the phone the first time they called for assistance, or the person that they met do discuss their situation seemed a little too knowledgeable about how the process would work and that it would succeed with no problems. Scammers routinely register with the Better Business Bureau and other reputable institutions to further the false appearance of legitimacy.

But if the owners had trusted their intuition that something was seriously wrong with the help that was being offered to them, they would have prevented wasting valuable time, money, and resources trusting in a scam. The amount of time scammers can eat away while providing no assistance costs the homeowners more in late fees, interest, and the bank’s legal expenses every day.

One way to prevent against such scams, besides trusting their own instincts, is for borrowers to learn about the basic procedures involved in foreclosure. Foreclosure is a legal process and lenders who pursue it must follow a large number of federal and state laws, as well as court rules of procedure. If they fail to comply with any of these regulations, the whole process may not be considered valid.

But too many homeowners do not even learn the basics of how foreclosure works, instead trusting the first person who offers assistance. There are literally thousands of pages contained in books, magazines, and on the internet that describe what to expect when borrowers miss a mortgage payment. It would be wise for homeowners to take advantage of these cheap or free resources.

Usually, just by reading through a little bit of state foreclosure law descriptions and other lending laws, homeowners will have a good idea of how long the process will take, as well as possible legal or other defenses against losing the home. This may include a few hours of work, but it can mean the difference between being able to help an attorney stop foreclosure, or being scammed out of thousands of dollars.

When encountering a new situation like foreclosure, homeowners need to be on high alert against scams and rely on their instincts to avoid wasting time and money. As they learn more about the foreclosure process, they can begin to put together more comprehensive plans and decide which type of assistance will be most beneficial in saving their homes.

Accept The Blame, Learn From Your Mistakes, And Move Past Foreclosure

©ddpavumba - freedigitalphotos

©ddpavumba – freedigitalphotos

Every week I hear hundreds of excuses about why a home was lost to foreclosure. As it turns out, according to the victims, someone else is always to blame. In 12 years of providing this type of help, I’ve only heard a handful of people say it was their own fault, even though nearly all foreclosures could be avoided, if the owners had acted differently. There are obviously exceptions to this rule, but in my experience, most homeowners should take a look at their own faults before trying to blame others. They could have read the mortgage contract at closing, purchased a more affordable home, or spent less money on unnecessary items. Many could have sold their home, refinanced before their rate adjusted, or found help sooner, but they were irresponsible and waited until it was too late. This might seem harsh, but it’s true; acting quickly to correct the problem and finding help from a qualified source can stop foreclosure nearly 100% of the time. Don’t get me wrong, I do understand there are uncontrollable events, such as divorce or medical problems, when a home may no longer be affordable, but there are many ways to solve these problems without the lender foreclosing on the home.

Today, the big excuse is the adjustable rate mortgage. Homeowners claim they didn’t know it was going to adjust, or they blame the lender who gave them the adjustable rate mortgage. The truth is, we’ve been using adjustable rate mortgages to get lower monthly payments since 1982. Every single person who accepted an adjustable rate mortgage was given documentation clearly explaining the mortgage, so if they didn’t read, or at least review the terms of their loan, it’s their own fault. Our legal system clearly states that ignorance of a law is not an excuse for breaking it. Just because you choose not to read a contract before you signed it, doesn’t mean you don’t have to abide by it. Countless people have told me how they originally went with a no/low interest, adjustable rate loan, because it was the only way they could afford their home at the time. Obviously the loan payment wasn’t going to get any lower and they clearly knew this, but they still blame their lender for raising the rates and causing the loss of the home. When someone buys a home that they can barely afford at the lowest possible interest rate, they shouldn’t be blaming their lender when they lose it a year or two later!

I’ve heard excuses like, “my best friend died” and I couldn’t find the courage to get out of bed; only to later find out their “best friend” was a pet gerbil. Another example is a client who said they couldn’t afford their $1,100 mortgage payment any longer, but for the previous three months, they had spent over $1,200 on iTunes and $1,000 at The Gap. This woman blamed her husband for not getting a better job and blamed the lender for raising the mortgage payment from $1,000 to $1,100. People with mental problems, who let their life fall apart because of the loss of a pet, are another story, but when you continually spend above your means, foreclosure and/or bankruptcy are inevitable. How can you possibly blame someone else for this?

I wouldn’t be writing this article if stories like these were few and far between, but nearly every single person we hear from has a similar story, each leading up to how someone else is to blame. Just when we think we’ve heard the most absurd excuse ever, we get a caller with something even more ridiculous. The scary part about all this, is that these people really believe someone else is to blame. They don’t take responsibility for their own actions that led down this path; which means they probably wont learn from their mistakes. This theory seems to be proven, based on the number of people who go into foreclosure multiple times, or spend 2 or 3 years in and out of foreclosure, until they finally lose the home.

Of course, everyone is quick to blame the lenders, or the government for not imposing stricter rules. But with stricter rules, many people wouldn’t have had a home to lose in the first place. Think about how many people were able to buy their home, under the old rules, who didn’t go into foreclosure. When new mortgage rules were imposed, home sales immediately dropped, which affected our home values and the overall financial market. Now we have tax supported bailout plans, so homeowners are blaming the government when they lose their home. Many are upset and were expecting the bailout plan to be a handout, rather than a plan to prevent this from happening in the future. Handouts today can almost certainly mean higher taxes and more government control over our spending in the future. Do you want the government to control when and where you spend your money? Maybe, when your credit score drops below 650, we should have a system where the government steps in and takes control of your entire life?

We live in America, where each person has the right to spend their (net) income almost any way they please, which also gives us the right to end up broke and living on the streets. We are each responsible for our own actions, both good and bad and it’s time we accept that responsibility. If we don’t accept this responsibility, we will risk losing it. If you are facing foreclosure, regardless of the reason, you need accept responsibility and determine what actions led you down the path to foreclosure. Whether it was not reading or understanding a legal contract at closing, or buying a home that was realistically more than you could afford. You need to determine what you could have done differently to change the outcome of events that led to foreclosure and make changes immediately. Stopping foreclosure is as simple as fixing the problem that caused the problem in the fist place, so until you can truthfully identify this problem, it will be impossible to stop.

Are Foreclosure Rates A Result Of Poor Education?

©africa - freedigitalphotos

©africa – freedigitalphotos

There’s no doubt that many foreclosures are a result of mortgage brokers not educating their buyers on the type of mortgage product they were buying. Brokers seem to neglect explaining the downsides of adjustable rate mortgages or balloon mortgages, and the huge risks involved. Education involves more than just providing the required pamphlets and documents, it means the teacher should make sure the student understands the material. It’s the job of every mortgage broker to educate their buyer on the products they are selling; both the good and the bad points.

Every product has a good side and a bad side. For example, adjustable rate mortgages have a very low introductory interest rate. For a first time home buyer, a 4% interest rate sounds much more appealing than a 8% interest rate. Even though the rate can adjust much higher, buyers are sold on the idea, because the mortgage broker claims that he’ll personally refinance the loan before it adjusts to a higher interest rate. He doesn’t explain that the buyer may not be able to afford the home at that time, because of the higher interest rate. Credit scores and income may also need to be higher at that point, in order to get an affordable interest rate. The law only requires a few pamphlets and a signed statement at closing; no real education is required. It’s a fact that this lack of education is a direct cause of the foreclosure problem, but is our country’s education system, or lack thereof, playing a much larger role in the overall state of our economy?

According to the PISA (Program for International Student Assessment), in 2006, American students only scored higher than 5 out of 30 countries. This means that 83% of students taking the test scored higher than or at the same level as Americans. The PISA measures the students ability to use knowledge of math, science, and reading in real world scenarios.

Our education system is getting worse every day and this directly correlates to our nations economy. At one time, our nation was the pinnacle of our worlds education system. It was a great privilege to send your children to school in America. Today, there are many countries that can provide a better education, and even provide better jobs after graduation. This also make foreign educated employees a better choice for many companies. By opening businesses abroad and outsourcing our labor to other countries, our CEO’s have made it very clear that they will hire the most qualified (and cost effective) candidates, regardless of how it effects our economy. Business leaders and politicions are suffering from our nations lack of education and we are seeing the results today in our economy. These leaders of our nation are making financial decisions that effect us all, but as it turns out, a 15 year old student in Korea may be better qualified!

To add to the crisis, it’s estimated that the health and education of over 2 million children will be effected by families losing their homes to foreclosure. When a child is uprooted from their home and their school, their physical and mental health will suffer. Children forced from their home experience behavioral problems, such as increases in violence and will have a higher drop out rate than children from stable households.

It seems we may be stuck in a never ending loop. If our lack of education is causing foreclosure and foreclosure is causing a lack of education, what can we do to make it stop? As the government continues to cut interest rates and devise bail out plans, it’s imperative for them to remember the children. Children are the innocent victims of foreclosure and the future of our nation will depend on their wellbeing and education. Keep your children’s education in mind at election time; vote for candidates who care about stopping foreclosure and repairing our country’s education system!

Can God Save Your Home From Foreclosure?

©m_bartosch - freedigitalphotos

©m_bartosch – freedigitalphotos

Most people in the USA seem to believe in God, or some sort of higher power, but do our higher powers care if we lose your homes to foreclosure? Across the nation, homeowners are praying to God to stop foreclosure and help them through their financial hardship. Realtors and mortgage brokers are even meeting in prayer groups to pray for more home sales. Obviously, if praying and faith alone were enough to stop foreclosure, we would have much less of a foreclosure problem in our country, but does that mean your faith and religion can’t help you through foreclosure?

st joseph statueMany churches now offer foreclosure assistance to their patrons by way of special foreclosure classes and education. These classes involve professional financial planning, as well as education about mortgages and predatory lending. A few churches may even provide financial assistance or provide loans to members of their congregation. The general public is welcome to attend any workshop or class, even if they are not associated with the religion. Catholic Charities USA sponsors many workshops across the nation and has provided help to over 4000 foreclosure victims. Many religions have similar classes and charities available on a weekly or monthly basis.

Another religious based foreclosure prevention technique is to bury a small plastic statue in the backyard when you need to sell your home. Burying a statue of Saint Joseph somewhere in your yard or garden is reputed to enlist the saint’s assistance in finding a buyer. This can help prevent foreclosure when you can no longer afford to make payments. Many homeowners, after having their home listed for years, have reported success within a few days after burying the statue. Some say the statue should be buried upside down until the home sells and removed afterwards. Others believe that leaving the statue will help protect the property for the new owner. For a mere $3.95, you can sell your home and avoid foreclosure, or so the ad says. Well, just like praying, if you’re facing foreclosure, you might want to enlist the help of anyone willing to offer it!

Your church can offer a great support group, and for many, their faith can provide the motivation needed to make it through tough situations. But, as with any difficult situation, you will need to accept help from all possible sources of help. There are many government programs available to help and foreclosure professionals can easily help you keep your home and get a lower payment by negotiating with your existing lender. You may even be able to refinance into a brand new loan, if you act soon enough. The key to stopping foreclosure is acting quickly and taking the steps necessary to stop foreclosure.

Although there are no facts that say praying will help save your home, I am pretty sure it will never hurt. But praying alone isn’t enough. Always remember, God isn’t going to save your home through divine intervention, but he just might point you in the right direction so you can find the help for yourself.

The Foreclosure Crisis and Failure in America

©David Castillo Dominici - freedigitalphotos

©David Castillo Dominici – freedigitalphotos

The latest “celebrity” foreclosure being reported in the news is that of a family who had been featured on the ABC program “Extreme Makeover.” Although they received a four-bedroom house for free and were also gifted another $250,000 for scholarships and a home maintenance fund, the house is now scheduled for sheriff sale. The outcry among blog authors and critics is a commentary on the contradictory attitudes regarding the foreclosure crisis and the issue of failing in America.

There is no doubt that this family made some serious financial errors, but the reason they went into foreclosure was due to a business that failed. They used the house as collateral for a 100% LTV, $450,000 business loan to start a construction company. As anyone who has followed the economy for the last year knows by now, real estate construction has taken a beating as the housing market has cooled and more existing properties are sitting foreclosed or abandoned.

But all in all, if the family took out the loan to begin a legitimate business to make money building structures for consumers, then there is little to be ashamed of in the failure of the business. Businesses in America fail every day, and few commentators have been heaping scorn on the numerous large corporations that have already filed for bankruptcy due to the economy. For some reason, though, it seems that this family is being held up as an example of how borrowers and lenders both squandered their resources in a vain attempt to make a quick buck in the housing boom.

If the homeowners’ business had been a wild success, it is likely the family would have been featured again on some follow-up show or news segment as an illustration of how wonderful the system can work, as long as people are given a helping hand by private industry and the community. Unfortunately, just the opposite happened, the business did not last, and the family has been labeled as failures. Even some of the volunteers who helped build the house on the show have been reported as angry at the waste!

But this outcry against the family misses the point that they attempted to use the resources they were given and begin a new business providing value to the community. Unfortunately, it is impossible to tell if a business will be successful until it is begun, and there is little reason to be ashamed simply because a business fails. The worst that this family did was not make sure they were more protected, or go into the venture more slowly and with better knowledge of the industry. But taking such risks are part of the experience of owning a business.

In fact, the outcry and criticism of this particular foreclosure is more a comment on the prevailing attitudes toward failure in America than a valid assessment of the family’s situation. Failure is just not allowed in America, a nation of go-getters, entrepreneurs, and self-made men. Because the entire financial and economic system is based on an adversarial relationship, there must always be losers and winners in business dealings. But with everyone trying to be a winner, the social stigma of losing can be enormous.

That is one reason there has been another emotional outburst over the story of a woman who committed suicide because her home was going into foreclosure. Losing in the financial game means losing one’s social status and sense of personal worth. The credit score is a self-esteem score for many Americans, and the amount they can borrow at a time is an indication of how well they are doing in life compared to how poorly their neighbors are doing.

Such attitudes and identifications with abstract scores need to stop if people are ever to accept failure as a natural part of their lives, both personally and economically. We all make mistakes, start business that fail, get sick, forget to plan for the future, lose jobs, and find ourselves swinging from success to failure in the blink of an eye. Rather than internalizing failure to the point of suicide or heaping scorn upon others who fail and finding fault where there is none, maybe it is time to reassess our attitude towards failure in general.

Psychology of Foreclosure — A Reflection on Financial Stress

Most financial hardships are especially troublesome from the perspective of the homeowners’ psychological stability. Couple the initial event like a job loss or medical disability with all of the potential effects like foreclosure or repossession, and it is no surprise that money troubles are at the top of the list of stress-inducing thoughts. With rising foreclosure rates and the stealing away of the American Dream by subprime mortgage companies and psychopathic financial institutions, the housing crisis has been creating various instances of self-destructive behavior in former homeowners.

©nuttakit - freedigitalphotos

©nuttakit – freedigitalphotos

First there were reports of “jingle mail,” homeowners who fell behind on their homes and, instead of attempting to work out the problem, simply mailed the keys to their properties back to the lenders. Worse than that were reports of foreclosure victims who set fire to their homes in a desperate effort to collect the insurance money and pay off their mortgages. The most disturbing possibility, however, is that homeowners will lose all hope and take their own lives to avoid the humiliation of being publicly evicted with no other place to live.

Rising foreclosue rates and rising incidences of exhibited mental health disorders will go hand in hand, to a certain extent. The financial hardships that often lead to foreclosure, and the realization by homeowners that they have no other options than to give up their homes, generate enormous amounts of stress. To be sure, many of these problems are little more than irrational fears, and the loss of a home is certainly not the end of the world for people. Unfortunately, the problems feel all to real and the threats of lawsuits and being homeless can seem very real to homeowners who know they have missed several mortgage payments.

The worst possibility is when these fears cause a sense of complete paralysis on the part of foreclosure victims, who retreat into their own heads to avoid dealing with the problem, hoping that a solution will magically present itself. In this case, the owners simply refuse to pick up their phone when the mortgage company calls, do not call the lender to see if they can qualify for a repayment plan or other option, and are even too frightened to request assistance from a third party foreclosure help company. This is obviously the wrong response to a financial crisis, but it is a common and understandable response.

It is, however, up to the owners of the property themselves to break out of this sense of despair; no one can help them until they take the first step and request assistance. The great thing about requesting help, though, is that the homeowners have now stated the problem and have taken the first step in solving the foreclosure — they have accepted they can not fix things by hiding from themselves. Many homeowners who have shaken off the chains of their own fears realize that change and doing something about the situation are far less stressful than wallowing in a state of depression and fear of the unknown.

Of course, the problem is how long the owners wait to begin solving their problems. The further behind in the mortgage they fall, and the longer they wait to ask for help, the more difficult it will be to stop foreclosure. This is for two reasons. First of all, the more payments they miss, the more it will cost to refinance, qualify for a mortgage modification,  or sell the house. The lender has no trouble adding late fees, court costs, legal fees, and other penalties to the mortgage balance, and interest accrues on these extra charges every month, pushing the homeowners further and further behind.

But more importantly, the second reason that waiting is a mistake is that the very act of avoiding the problem becomes self-reinforcing. The homeowners procrastinate waiting for help to avoid facing the fear of being turned down for a workout or being threatened with eviction. In turn, this procrastination reinforces the irrational fears, which reinforce the act of waiting until nothing but a true psychological shock will convince the owners to wake up and ask for help. This moment of realization may come too late, possibly in the form of a three-day eviction notice.

Unfortunately, few mainstream articles or books are available that discuss the psychology of homeowners facing the possibility of losing a home to foreclosure and what they can do to overcome irrational fears and get to work saving their homes. Our own psychology of foreclosure section is a modest contribution, and more articles are appearing in the mainstream media about how to cope with financial stress, but much more can be done. Ultimately, though, it is usually the homeowners who have not even taken the step of reading about foreclosure that are in the worst danger of causing themselves or others damage because of high anxiety caused by money problems.