Patterico's Pontifications

3/19/2010

“It’s a Feeling of Being Duped”

Filed under: Economics — DRJ @ 7:12 pm



[Guest post by DRJ]

Some homeowners who have sought government assistance in paying their mortgages are surprised to see their credit ratings decline:

“To enroll in the Obama administration’s $75 billion “Making Home Affordable” program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus — Experian, Equifax and TransUnion.

For delinquent borrowers, the damage was done when they fell behind on their loans.

But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower’s credit score.”

Some of these homeowners feel duped:

“And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich.

“It’s a feeling of being duped,” she said.”

Maybe counselors should warn their clients, although it’s hard to believe a homeowner wouldn’t realize that using a loan assistance program signals lenders that the borrower may be in trouble. Amazingly, lenders are having to defend themselves:

“The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus.

“The consumer is going into the program because they’re in a financial bind,” he said. “Other lenders would need to be aware of that.”

We really, really need to put real life examples back into basic math and economics classes. Too many Americans are economically illiterate.

— DRJ

114 Responses to ““It’s a Feeling of Being Duped””

  1. You mean to tell me that Obama doesn’t actually care about helping taxpayers so much as looking like he’s doing so? Well, I’m sure health care will be different.

    Sean P (334463)

  2. DRJ, among the many astonishing things that one learns in a bankruptcy practice is that people who have fallen delinquent in their mortgage have an amazing sense of entitlement. They think that there should be no consequences to their own decisions. It is always someone else’ fault that they bought a more expensive home than they needed or could pay for, that they pulled equity out in loans to buy crap that has no value, paid for vacations, or in one case bought breast implants …

    For that matter, the stories I hear about mortgages … I can’t tell you how many times people have told me that the mortgage company took advantage of them, sold them a loan that didn’t match what they’d been told, was variable when promised fixed, etc., then faxed me the documents where the page with bold face stating what the mortgage was had their signature right on it.

    Obama’s faux program has deluded hundreds of thousands of people into thinking that there was some magic remedy to their problems, when it has actually helped no more than a handful of people.

    SPQR (26be8b)

  3. “But … but … it isn’t FAIR!!!!”

    Brother Bradley J. Fikes, C.O.R. (9eb641)

  4. “People who sign up for loan modifications would not be asking for help unless they were having severe money troubles”

    Normally I would agree with the above statement, but with the way Obama was banging on “greedy” lenders, it sounded like almost anyone could get their loans modified. I know people who were current who were advised by lenders to skip a few payments and then apply – seriously.

    daleyrocks (718861)

  5. If they did not realize this would effect their credit score, then it was pretty much inevitable that their credit score was going to be effected by something, eventually.

    JD (812f4d)

  6. daleyrocks, that’s because there is no real incentive, nor does it even make sense, for lenders to make modifications for people who are really in trouble. Those modifications fail inevitably.

    SPQR (26be8b)

  7. daleyrocks,

    Advised by lenders to get delinquent? Surely not by the homeowner’s lender. I can’t imagine a lender would tell its own borrower not to pay — not only is it bad for the lender but it might open the door to bad faith and other claims.

    DRJ (daa62a)

  8. DRJ, its done backhanded, as in “No, you are not eligible for that program … as you are not currently delinquent …”

    SPQR (26be8b)

  9. SPQR – I understand, it’s too bad the Obama Administration did not understand. All those lenders were raaaaaaacists for not agreeing to immediate, no questions asked, modifications if you ask me, even though we were trying to shore up the banking system. Greedy haters!

    daleyrocks (718861)

  10. When you hear “I’m from the government and I’m here to help you”, run as fast as you can and don’t look back.

    MU789 (e935dc)

  11. A lot of people apparently think that good credit, like health care, is something that just naturally occurs…except that some greedy rich people that all look like the little dude in the Monopoly game are keeping it away from salt-of-the-earth Little Guys out of pure motiveless malice. The idea that actions have consequences, and that doing something stupid can rack up your credit for years and years, doesn’t seem to exist in their world.

    Technomad (e2c0f2)

  12. “Amazingly, lenders are having to defend themselves:”

    Not lenders. The credit bureaus.

    imdw (de7003)

  13. “…Too many Americans are economically illiterate.”

    Yes, we call them Members of Congress!

    AD - RtR/OS! (b083e4)

  14. I had my mortgage modified. The downturn in the economy hit me hard. The company I worked for closed. I got another job and then was laid off. I took another job which took 45 minutes longer to get to each day and I had to pay rediculous tolls. I had 4 different jobs in that first year. I ended up taking a management position to earn higher pay with a different pay arrangement that brought in more money. I worked over 60 hours a week. I borrowed money from family so that I never missed any payments on my house or bills. But that’s just what you do. Then the escrow went up and I went for the modification. I was not and had never been late on a payment.

    It took 9 months and about 10 hours a week on the phone. The program changed 3 times during that 9 months. I was told as long as I paid my payments on time I would not be reported late. But what the mortgage companies didn’t tell us was that they were placing all of our “trial” payments in an account. They weren’t applying them to your mortgage. The trial period which was supposed to be for 3 months ended up lasting 5. When my first payment on the final modification came due I paid it early. (and they ended up raising the payment quite higher than the modified payment) They didn’t apply it or the previous 5 payments until the end of the 6th month. And they reported all of them late.

    They did 1 investigation into what I was told and fixed one of the late notices early on in the process. Then I found out about them putting the payments into a separate account and 2 investigations later, 4 letters where they have claimed to remove the lates and they’re still reporting them late. Now they say they don’t see where they are reporting them late even though they are.

    They lied about the process from the beginning. One department doesn’t know what the other is doing.

    And I am in the business so I understood exactly what I was being told and what to do. I held up my end and they didn’t hold up theirs. And it’s all recorded on their phone system. They are currently breaking fair credit reporting laws and I may have to get an attorney to straigten it all out.

    Others I know who have gone through the process at different lenders didn’t have any of these issues. It all depends on who your servicer is and believe me there is a difference between them.

    Whippet (a31089)

  15. This may be the first thread I’ve seen where everybody is right (even imdw :-) )

    fat tony (568ac4)

  16. Comment by imdw — 3/19/2010 @ 8:34 pm

    shut up. your “comments” have been deemed erroneous.

    redc1c4 (fb8750)

  17. “Not lenders. The credit bureaus.”

    imdw – Credit bureaus get their information from the lenders. The credit bureau won’t change negative information from a lender without going back to the lender. Nothing has changed in the way the system has worked for credit bureaus.

    daleyrocks (718861)

  18. snip wholly believable tale of woe snipped
    Comment by Whippet — 3/19/2010 @ 9:00 pm

    you forgot to thank Saint Obama for the wonderful plan that allowed you, out of his kindness, to get in that situation….
    imdw and the rest of the idiots will *not* be pleased with your racist lack of gratitude.

    redc1c4 (fb8750)

  19. Comment by daleyrocks — 3/19/2010 @ 9:21 pm

    hence my #16…. 😀

    redc1c4 (fb8750)

  20. My lender was a tarp recipient and one of the reasons the trial period went on so long was because my modification had to be approved by Freddie Mac…remember them?

    The problem is….many banks have worked with borrowers on their own, especially in economic downturns for years. I know people who are unemployed. They got behind, their banks called them up and reduced their payments temporarily. No long process of formal modification…it was quick and the people were thankful. Once the tarp money got thrown in the mix all of the rules changed. Government gets involved so do government turn times….and they move like snails….

    Whippet (a31089)

  21. Whatever, learn to pay cash.

    Don’t have the cash? Don’t buy it.

    I have everything I need. Sure, I don’t own a home, but who cares if someone wants to build a sports stadium or, as we have found out, a strip mall.

    Enough with buying things with money you don’t have is what I say.

    Jeff Barea (eff5e1)

  22. (mutter, grumble)

    Legally illiterate … economically innumerate …

    They can’t read the legalese – and they can’t (or won’t) do the arithmetic on the economic side …

    Inablity to balance a checkbook or other account is an arithmetic problem, not a linguistic problem …

    (OK, OK, there is such a thing as ‘language of mathematics’ – but simple interest, addition, subtraction, multiplication, and division – those are not linguistic)

    Alasdair (205079)

  23. Then again, one *could* say that missed mortgage payments are ill-iterate problems, but that’s obscure even for *me* ! (grin)

    Alasdair (205079)

  24. That’s a good correction, Alasdair. I was thinking of people who don’t grasp basic economic concepts, without even getting to the math issues, but I agree innumerate is a better description.

    DRJ (daa62a)

  25. A credit rating reflects your history of paying your debts on time and in full.

    When you don’t do that — through a loan modification program or whatever — your credit rating suffers.

    Is this rocket science?

    shipwreckedcrew (c0d6cd)

  26. shipwreckedcrew – with the advent of Mentos and soda bottles, even Rocket Science ain’t rocket science any more !

    Alasdair (205079)

  27. Cluster-f*cked programs like this, in economic times like this, make me glad that I rent and never took out a mortgage during the housing bubble.

    There’s something to be said for not being a debt slave.

    Another Chris (35bdd0)

  28. Are these the same dupes that bought into Obama’s “peace, jobs and democracy” drivel? Commies need sufficient ignorant useful idiots to stand in their crowds and yell.

    America, we seriously need an enma.

    bill-tb (541ea9)

  29. The attitude of these homeowners exemplifies perfectly the spoiled sense of entitlement that government largesse inevitably brings. It’s not enough that responsible taxpayers are paying out of pocket for homeowners (many of them irresponsible) to make their mortgage payments; they also expect, absurdly and unreasonably, to have no negative impact on their credit score as a result!!? Completely ridiculous.

    Guy Jones (7a4dff)

  30. “imdw – Credit bureaus get their information from the lenders. The credit bureau won’t change negative information from a lender without going back to the lender. Nothing has changed in the way the system has worked for credit bureaus.”

    Nope nothing has changed. But the reduction in credit ratings is coming from the credit bureaus. And though DRJ says ‘the lenders’ the paragraph quoted says ‘the credit rating industry.’ That’s the credit bureaus.

    With respect to the credit rating, everybody is behaving exactly as they always have.

    I do agree that this is a problem with this program. Not that the problem is that people didn’t know this would happen, or that this shouldn’t happen. I think it is indicative that it is a poor program that going into it puts you in a worse credit position.

    imdw (de7003)

  31. I know people who were current who were advised by lenders to skip a few payments and then apply – seriously

    I have a friend who’s seriously underwater on a house he bought about four years ago – he lost his job awhile back and stopped making payments almost eight months ago. While he and his wife know that their credit rating’s going to hell after they file for bankrupcty, their lawyer advised them to stop paying the mortgage, because their bank was going to repossess it anyway in the end. Sound advice.

    Dmac (ca1d8c)

  32. “…Too many Americans are economically illiterate.”

    Yes, we call them Members of Congress!

    Comment by AD – RtR/OS!

    ~~~~~~~~~~~`

    My first smile of the morning, thanks, AD!

    GeneralMalaise (20e943)

  33. Predatory lenders… irresponsible, dishonest morons who wanted a piece of the “American Dream” of home ownership without the wherewithal… politicians… DemocRATS… CRA… Rear Admiral Bahney Fwank… Chris “Half-A-Samich” Dodd…. Wall Street… Franklin Raines…

    To my way of thinking, people should’ve been prosecuted and going to prison for this. It happens again, there should be summary executions… but that’s just the way I roll.

    GeneralMalaise (20e943)

  34. “I know people who were current who were advised by lenders to skip a few payments and then apply – seriously”

    Lenders are not on your side on this. It is in their interest that you go on this program. I read somewhere that your principal ends up higher in this program — since all the fees are wrapped up in your new principal. Ridiculous.

    “While he and his wife know that their credit rating’s going to hell after they file for bankrupcty, their lawyer advised them to stop paying the mortgage, because their bank was going to repossess it anyway in the end. Sound advice.”

    Exactly. Walking away, or walking into foreclosure, is how a rational economic actor would act. It’s not pretty but it is better than the alternative. It’s how business operates. People should do the same.

    imdw (37a016)

  35. “Exactly. Walking away, or walking into foreclosure, is how a rational economic actor would act.”

    imdw – It strange that liberals don’t get this. Obama wants banks to act irrationally in many instances at the same time he wants to shore up the banking system. A rational President would not do that. Control of private enterprise does strange things to the government.

    daleyrocks (718861)

  36. But daley, don’t worry: progressive leftists know that Big Daddy or Big Momma will bail out any of their poor choices. And their poor choices are not their fault, remember!

    Nothing is their fault. Ever.

    BM or BD will take care of everything.

    But…

    Freedom times security equals a constant. Always.

    Eric Blair (aeddbf)

  37. imdw
    Walking away, or walking into foreclosure, is how a rational economic actor would act. It’s not pretty but it is better than the alternative. It’s how business operates. People should do the same.

    Agreed. And this was foreseen years ago. This is especially true for homeowners with children, because fulfilling obligations to them are going to come first over any bank.

    daleyrocks
    Judging from Obama’s grossly inaccurate understanding of auto insurance and innumeracy (3,000 percent reduction!) about health insurance, he has little understanding about the private sector, period. All of Obama’s knowledge comes from Teleprompter sound bites and “instruction” by the likes of Bill Ayers and Jeremiah Wright.

    Brother Bradley J. Fikes, C.O.R. (9eb641)

  38. Eric – Plus owning a slug of a lending institution through TARP eans you can try to tell it to do things against its interest at the same time you are trying to improve its financial condition, for the good of society, or so the liberal theory goes.

    daleyrocks (718861)

  39. “Agreed. And this was foreseen years ago. This is especially true for homeowners with children, because fulfilling obligations to them are going to come first over any bank.”

    For some reason moralists like Michelle Malkin don’t get that what’s important in life is not paying more than a house is worth to a bank to cover their risk.

    imdw (de7003)

  40. means

    daleyrocks (718861)

  41. “For some reason moralists like Michelle Malkin don’t get that what’s important in life is not paying more than a house is worth to a bank to cover their risk.”

    imdw – Link for example please.

    daleyrocks (718861)

  42. Well, contrary to many others, if I was not behind on my mortgage but found a way to adjust it because of job loss, etc. through a govt. program put in place because of the overall state of the economy and housing market, i would not have expected it to negatively effect my credit rating (which is over 700, so we’ve done something right).

    And I don’t think any of us would/should have expected the treatment that whippet received (unless out of general cynicism).

    I am not a business person at all, but I would think that a private business would have been able to buy mortgages in distress from a bank at a loss to the bank (but less of a loss than they’ll take when it goes into foreclosure, especially if they are already getting TARP money) then the new holder of the mortgage can make an arrangement with the “owner” for something that would work. Certainly applicants would be screened, for this would not be profitable for every mortgage in default. But then again, Im not a businessman, and besides,

    “Does anyone really know where the TARP funds are?
    Does Obama really care? (about funds)-echo
    I can’t imagine why, he wants the economy to die”

    (Think “Does anyone know what time it is” by “Chicago”)

    MD in Philly (59a3ad)

  43. “imdw – Link for example please.”

    She’s talked about losing the stigma of default several times over the years. It’s really odd that she wants banks payed in full and people to suffer.

    imdw (603c39)

  44. Don’t you understand, daley?

    The troll knows things. That is what a troll feels, so it must be true.

    Besides, that isn’t his or her play: he or she wants other people to go fetch links. Think about it.

    Eric Blair (aeddbf)

  45. Besides, that isn’t his or her play: he or she wants other people to go fetch links. Think about it.

    IOW, just like a leftie, he or she wants others to do the work. 😉

    Brother Bradley J. Fikes, C.O.R. (9eb641)

  46. Obama wants banks to act irrationally in many instances at the same time he wants to shore up the banking system.

    When it comes to such matters, the idiocy and foolishness of the guy in the White House is astoundingly apolitical, amoral and corrupt (philosophically, if not financially too)…

    William Kristol, February 10, 2010

    [Liberal New York Times columnist] Paul Krugman is, I think, right to be amazed by Obama’s embrace of the $17 million bonus given to JPMorgan Chase Chief Executive Officer Jamie Dimon and the $9 million issued to Goldman Sachs CEO Lloyd Blankfein.

    If Obama’s idea of moving to the middle politically is to embrace Wall Street’s too-big-to-fail banks, he’s crazy. Usually Republicans are the party of Big Business and Democrats of Big Government, and the public’s hostility to both more or less evens the politics out. But if Obama now becomes the spokesman for Big Government intrusiveness and the apologist for Big Business irresponsibility all at once — good luck with that.

    And look at the tone-deafness of Obama’s comments about the bonuses:

    “President Barack Obama said he doesn’t ‘begrudge’ the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.

    The president, speaking in an interview, said in response to a question that while $17 million is ‘an extraordinary amount of money’ for Main Street, ‘there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.’

    ‘I know both those guys; they are very savvy businessmen,’ Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. ‘I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system.”

    First of all, as Krugman points out, “irresponsible behavior by baseball players hasn’t brought the world economy to the brink of collapse.” Nor has the federal government spent billions (trillions?) bailing out baseball owners after they signed foolish contracts. Nor does it guarantee baseball owners’–or players’–future solvency.

    And second, doesn’t Obama realize how creepy this statement is? “I know both those guys; they are very savvy businessmen.”

    This confirms the suspicion that we now live in a world of crony capitalism, where if Obama knows and thinks well of you, then you don’t get criticized–but if you’re some guy who hasn’t spent a lot of time cozying up to government leaders, then you could easily be the object of demagogic assault by politicians.

    Conservatives and Republicans should not–as some seem to be tempted to do–praise Obama for being friendlier to business in this interview than he has been in the past. They should point out that he’s friendly to big businessmen who are friendly to him, and to businessmen whose businesses are enmeshed in an unhealthy way with big government–and that he remains hostile to markets and indifferent, at best, to businessmen who are actually trying to make it without depending on the goodwill of politicians and favors from the government.

    Mark (411533)

  47. “She’s talked about losing the stigma of default several times over the years.”

    imdw – Without links your comment is worthless. Context please.

    daleyrocks (718861)

  48. “Does anyone really know where the TARP funds are?”
    MD in Philly….

    IIRC there was a decision this week on this matter from the Fed Circuit Court in NYC directing the Fed and Treasury to release this info.

    AD - RtR/OS! (c811db)

  49. imdw – Without links your comment is worthless. Context please.

    TFTFY!

    AD - RtR/OS! (c811db)

  50. The HAMP program has been sold as a measure of protection for homeowners and for the mortgage market. However, along with many of the administrations current programs and proposals, it should more appropriately be viewed as an unnecessary and even dangerous intervention of government within the market. A homeowner and lender contract for financing, the homeowner finds he cannot fulfill the contract – what should happen next? Should the government step in and require that the lender, rather than operate under the terms of its contract, devote money and resources into ensuring that the homeowner modify the terms of the already agreed upon contract? In essence, requiring the lender spend money to lose money on the contract. And even after dedicating time and energy into keeping homeowners in their property, the high fallout rate for modifications indicate that odds are the lender will lose money on this investment of resources when the homeowner eventually defaults on the modification program.

    Many might think that because the problems with the housing market are occurring on such a large scale that the government should impose itself into these matters. With estimates of over 4 million loans just on primary residences not performing, either because of delinquency or default, it might seem that government intervention is right. But where will it end? And what is the long term cost of the intervention?

    The answer to the first of those last two questions is that it may not end. HAMP is now being followed by HAFA (Home Affordable Foreclosure Alternatives Program) which will begin April 5th. This new set of guidelines will require certain lenders and servicers to offer alternatives to foreclosure for homeowners who cannot qualify or complete a modification program under HAMP. This will only reinforce the expectation that lenders/investors will not act in their own interest, and under the terms of their contract with the homeowner, but will defer to the government’s will. Next stop, moratoriums on foreclosures – all happily propped up by the government.

    So, as to the long term consequences – homeowners, who as noted in the article post, lose their ability to pick themselves up from the mess they are in by extending the period of time in which their credit ratings are in the tank; markets, which are artificially propped up because inventory that should be entering the market is being held up under these programs, will steer dangerous toward the edge of the cliff when a glut of properties do become foreclosure inventory because many of these programs may fail; the rest of us also pay the price as banks raise their fees, reduce their services, and eliminate or trim down consumer and commercial products to make up the margins they are losing on loan portfolios; and finally, we may find the government, continuously postulating the canard that some things are too big to fail and having itself invested government funds in these programs, decides that the market cannot rely on the free will of any of its actors and, therefore must be entirely controlled.

    Long post I know, and sorry about that – but whether we realize it or not, this is leading the same direction as government run healthcare, student loan and education reforms, and cap-and-trade legislation. The administration is just being a lot more subtle.

    Thorne (8fc7af)

  51. Many foreclosures in California have become strategic. Initially most home owners’ main objective was to “keep the house—at any cost.” Now that has changed and most folks just want to stay in the house for as long as possible without making any mortgage, insurance or HOA payments (many continue to make property tax payments because they know that debt is forever).

    There is a story I have heard about 11 home owners on a cul de sac (outside our once Golden state this is called a dead-end street) in Laguna Niguel who are all in default, many approaching two years and have monthly meetings to compare notes and plan the best ways to stay in the house as long as possible without making any payments.

    Congress and the California legislature have enacted laws which extend the foreclosure process. In California, from your first missed payment, the earliest you could be evicted from your home is 9 months and 21 days. Tenants actually have extended rights from an additional 90 days to the end of any lease period.

    So, people have learned to work the process and milk a year to two years of not making any payments. If their first trust deed is foreclosed on in the typical non judicial process, then the total mortgage, missed payments and interest is no longer collectable by the bank. Every other voluntary or involuntary lien is collectable but now by judicial process.

    The moochers have even learned that the free ride doesn’t end when the new owner of the foreclosed house comes to the door to “evict.” The foreclosed owner demands cash for keys ($2000-$5000)in exchange for leaving the house in its current condition and not taking out revenge on the property. This is very, very common.

    PC14 (82e46c)

  52. Let’s not forget what the consequences are for the financial community, and borrowers in the future, if the government is allowed to impose “cram down” via the BK courts.

    A Capital Strike is not a pleasant thing for those who don’t have the option of “clipping coupons” for a living.

    AD - RtR/OS! (c811db)

  53. Thorne-
    No apology necessary, that’s why we come here, to be educated.

    It’s the liberal way. When something doesn’t work out, never hold the people responsible who failed in their responsibilities, rather make new laws and give a front that something is being done.
    Instead of putting people out of Congress and into jail for forcing the financial system to take on poor risk, we institutionalize bad risk so it doesn’t blow-up again, it just smolders under a governmental “cloaking device”.

    MD in Philly (59a3ad)

  54. Remember the old saying that a liberal was a conservative who hadn’t been mugged yet?

    These loan mod recipients just got mugged, by the guvmint.

    Patricia (e1047e)

  55. “For some reason moralists like Michelle Malkin don’t get that what’s important in life is not paying more than a house is worth to a bank to cover their risk.”

    No idea whether she has taken this position (or not), but for some folks, integrity is important. One signs on the dotted line and one is hoping that the purchase that one has committed oneself to will be both a home and a good investment. The first is reasonably assured, but there are no guarantees on the second. And I write this as a homeowner who has a mortgage that is currently “underwater”.

    If one walks away from a contract, one should expect to suffer the consequences.

    GeneralMalaise (20e943)

  56. Yes, but their response is to demand even more intervention by that government, that can only muck-it up even worse, which will lead to more clamor for support, etc etc.

    What we are witnessing is the beginnings of a death-spiral, that the longer it goes on, becomes virtually impossible to stop.

    AD - RtR/OS! (c811db)

  57. If one walks away from a contract, one should expect to suffer the consequences.

    Completely counter-intuitive to members of the Self-Esteem Generation.

    AD - RtR/OS! (c811db)

  58. “imdw – Without links your comment is worthless. Context please.”

    Just search ‘stigma of default':

    http://michellemalkin.com/2009/11/30/the-death-of-the-stigma-of-default-revisited/

    “Initially most home owners’ main objective was to “keep the house—at any cost.””

    Dear god that is stupid.

    “Let’s not forget what the consequences are for the financial community, and borrowers in the future, if the government is allowed to impose “cram down” via the BK courts.”

    The same thing as a foreclosure. Except that the interests of hte occupier are lined up with the interests of the owner, and we don’t have the situation that PC14 just described.

    “If one walks away from a contract, one should expect to suffer the consequences.”

    Yes indeed. Specially if the consequences of walking away are BETTER than the consequences of staying in!

    imdw (2c1194)

  59. “For some reason moralists like Michelle Malkin don’t get that what’s important in life is not paying more than a house is worth to a bank to cover their risk.”

    For some reason the concept of adhering to the terms of a written contract is an anathema to liberals when when it becomes inconvenient.

    daleyrocks (718861)

  60. “For some reason the concept of adhering to the terms of a written contract is an anathema to liberals when when it becomes inconvenient.”

    Maybe I see this different, but going into foreclosure *is* adhering to terms. You’re taking the consequences of breach, according to the terms.

    imdw (b40b74)

  61. Dear god that is stupid.

    My Dear Momma always said: “Stupid is as stupid does!”.

    And some are deemed to be self-executingly stupid.

    AD - RtR/OS! (cdee11)

  62. Loan modification will work as well as cash for clunkers. Over 50% of the cash for clunkers purchases have been repossed in this area. Now hundreds of people don’t have the new vehicle or the clunker. I guess O’Dumbo planned to put people back to walking for their health. BWAHAHAHA

    Scrapiron (4e0dda)

  63. Loan modification will work as well as cash for clunkers. Over 50% of the cash for clunkers purchases have been repossessed in this area. Now hundreds of people don’t have the new vehicle or the clunker. I guess O’Dumbo planned to put people back to walking for their health. BWAHAHAHA

    Scrapiron (4e0dda)

  64. I suppose, in the spirit of charity, that no-one ever explained to imadickwad that if “cram-down” is allowed, the lenders in the future will demand both greater down-strokes, and higher interest rates, to minimize their down-stream risks; which means that credit will become more constricted, pricing more people out of the market, unless (of course) the entire segment is taken over by GSE’s (the Feds) and the pseudo-nationalized banks, who will be under orders to accomodate less-than-prime lenders, putting all tax-payers on the hook for the poor economic choices of a few.

    AD - RtR/OS! (cdee11)

  65. less-than-prime borrowers….not lenders…

    AD - RtR/OS! (cdee11)

  66. “which means that credit will become more constricted, pricing more people out of the market,”

    The idea that there will be less credit as a result of our response to a credit bubble is kind of the point.

    imdw (de7003)

  67. “Maybe I see this different”

    imdw – That is probably a certainty given your implicit trashing of Malkin’s “moralizing.” Have you produced the context for her moralizing? Are you recommending defaulting on legal contracts when they become inconvenient is the way the American financial system should work, no shame, blame, muss or fuss?

    daleyrocks (718861)

  68. Just another pop-fly that sailed right over its’ head.

    AD - RtR/OS! (cdee11)

  69. Comment by imdw — 3/20/2010 @ 1:07 pm

    i deem this response idiotic.

    redc1c4 (fb8750)

  70. imdw – Please interpret that Malkin link in comment #58 for the benefit of us rubes. Is that inappropriate moralizing?

    daleyrocks (718861)

  71. morality is inappropriate to lieberals, unless, of course, *they* are the ones doing it.

    i deem “imdw” to be immoral.

    redc1c4 (fb8750)

  72. “Are you recommending defaulting on legal contracts when they become inconvenient is the way the American financial system should work, no shame, blame, muss or fuss?”

    When default is more rational, people should default. That’s how business works. Malkin wants there to be ‘stigma’ to this. That’s moralizing.

    imdw (b40b74)

  73. “When default is more rational, people should default. That’s how business works…”

    ~~~~~~~~~~~~~~~~

    Ooh, your wisdom in the area of credit counseling is exceptional. We can’t allow you to waste it here when there are so many people plummeting toward insolvency at this very moment.

    Go, go, for the good of the country!

    GeneralMalaise (20e943)

  74. Were there any links from the Troll, or more…trolling? Just asking if he or she is proving true to trollish form.

    Eric Blair (9b430c)

  75. <

    i>”…Dear god that is stupid….”

    Well, something is certainly stupid.

    Eric Blair (9b430c)

  76. “When default is more rational, people should default.”

    imdw – So your position is that legal contracts do not mean anything so defaulting on them should carry no stigma. Good to know. Try that in court some time and let me know how it works out. You sound like the moralizer, not Malkin.

    daleyrocks (718861)

  77. Rules don’t matter to Democrats, daleyrocks. Alcee Hastings said so.

    DRJ (daa62a)

  78. DRJ – Right, him being an impeached judge and all. imdw is just illustrating the phenomenon Hastings gave voice to of making the rules up as you go along, as well as the circular logic of imdw’s comments.

    daleyrocks (718861)

  79. #42 MD

    Thanks for kind words.

    I participated in the modification program to keep my home so that it was not foreclosed on and returned to my lender at a huge loss. If my house is upside down then I feel it just means I need to honor my commitment and stay in it until I either pay it down enough or until the market rises to meet my mortgage again.

    My complaint is not that lenders are reporting that I am paying a modified mortgage, because I am. Although I was specifically told by numerous people that I spoke with during the process that I wouldn’t be that is not my complaint. My issue is that I was told I wouldn’t be reported late if my payments were paid on time throughout the modified process, which they were…before the mod, during, and after, but that they took those payments and held them in an account and didn’t apply them to my loan for 6 months forcing my record to show I was paying late or not at all. That was never part of the plan but a choice by the servicer to monitor the plan. The modification department wasn’t reporting to the servicing department to tell them that payments had been received. And they lied to me, telling me I wasn’t being reported late when I was. That is a serious violation to the fair credit reporting act by the servicer/lender.

    I have no beef with the credit reporters because they can only report what they are told to report from the lenders…contrary to some people’s opinion.

    Whippet (a31089)

  80. […] more: “It’s a Feeling of Being Duped” […]

    “It’s a Feeling of Being Duped” | Liberal Whoppers (d16888)

  81. “I have no beef with the credit reporters because they can only report what they are told to report from the lenders…contrary to some people’s opinion.”

    You know they’re the ones that calculate your credit score, right?

    imdw (e66d8d)

  82. Comment by imdw — 3/20/2010 @ 12:14 pm
    Just search ’stigma of default’:

    Wow, way to completely ignore the context, as others have already guessed.
    The above is immediately followed by:

    Political rhetoric absolving borrowers of their responsibilities — and encouraging them to spend, spend, spend even more — has made it possible. And so has federal legislation intended to “help.”

    She’s trying to point out that the continual, usually liberal, ideals and laws that keep “protecting” people from their own mistakes, rather then letting them learn their lesson, is causing much larger problems. Just like the current mortgage crisis and the collateral damage that it’s causing. Her point seems to be that perhaps if we would bring back the stigma of living beyond one’s means and having to declare bankruptcy or default on a mortgage, that people wouldn’t be so quick to get so deep into dept and then not care when it finally catches up to them.
    This post:

    Comment by PC14 — 3/20/2010 @ 9:39 am

    Similar to some things I’ve seen in CA myself, are perfect examples. Liberal democrats in the state are doing all they can to demonize owners and banks and basically allowing people to (for lack of a better word) steal a home for as long as they can when they got themselves into trouble by buying far too much house.

    My bigger gripe with all this is that people who’ve been responsible (like me) are the ones getting stuck paying for all this bail-out crap through higher taxes.

    Going along with the above post’s story, there was a story on the local San Diego news back when the defaults were barely starting about some guy that was similarly milking the existing tenant laws to rip people off left and right. He’d get a room at a motel or hotel, stay the required 28 days (I think it’s 28 days) so that he was then technically considered a tenant vs a normal hotel customer, immediately stop paying and continue to live there for several months as the hotel/motel now had to go through the steps required to evict a renter. The guy had no shame either. The news tried to interview him and he’d tell them to piss off, or would simply say he was just following the law. He wouldn’t admit it was, if not illegal, at least immoral.

    Miguelito (f443a7)

  83. Comment by imdw — 3/20/2010 @ 12:14 pm
    Just search ’stigma of default’:

    Wow, way to completely ignore the context, as others have already guessed.
    The above is immediately followed by:

    Political rhetoric absolving borrowers of their responsibilities — and encouraging them to spend, spend, spend even more — has made it possible. And so has federal legislation intended to “help.”

    She’s trying to point out that the continual, usually liberal, ideals and laws that keep “protecting” people from their own mistakes, rather then letting them learn their lesson, is causing much larger problems. Just like the current mortgage crisis and the collateral damage that it’s causing. Her point seems to be that perhaps if we would bring back the stigma of living beyond one’s means and having to declare bankruptcy or default on a mortgage, that people wouldn’t be so quick to get so deep into dept and then not care when it finally catches up to them.
    This post:

    Comment by PC14 — 3/20/2010 @ 9:39 am

    Similar to some things I’ve seen in CA myself, are perfect examples. Liberal democrats in the state are doing all they can to demonize owners and banks and basically allowing people to (for lack of a better word) steal a home for as long as they can when they got themselves into trouble by buying far too much house.

    My bigger gripe with all this is that people who’ve been responsible (like me) are the ones getting stuck paying for all this bail-out crap through higher taxes.

    Going along with the above post’s story, there was a story on the local San Diego news back when the defaults were barely starting about some guy that was similarly milking the existing tenant laws to rip people off left and right. He’d get a room at a motel or hotel, stay the required 28 days (I think it’s 28 days) so that he was then technically considered a tenant vs a normal hotel customer, immediately stop paying and continue to live there for several months as the hotel/motel now had to go through the steps required to evict a renter. The guy had no shame either. The news tried to interview him and he’d tell them to piss off, or would simply say he was just following the law. He wouldn’t admit it was, if not illegal, at least immoral.

    Miguelito (f443a7)

  84. “Liberal democrats in the state are doing all they can to demonize owners and banks and basically allowing people to (for lack of a better word) steal a home for as long as they can when they got themselves into trouble by buying far too much house.”

    People forget that in order for someone to buy “far too much house” a bank needed to have lent far too much money. There’s two parties here, and we can’t just blame one.

    imdw (8f8ead)

  85. imdw:

    “If one walks away from a contract, one should expect to suffer the consequences.”

    Yes indeed. Specially if the consequences of walking away are BETTER than the consequences of staying in!

    In Texas, and probably in a few other states, real estate borrowers are still liable for any deficiency if they default on their mortgages. It doesn’t make sense for those borrowers to default if they can avoid it.

    DRJ (daa62a)

  86. “In Texas, and probably in a few other states, real estate borrowers are still liable for any deficiency if they default on their mortgages.”

    Even if they are bankrupt?

    imdw (997b7f)

  87. This thread is just classic vintage imdw.

    JD (5a5e2d)

  88. It is cute how it keeps blaming the banks for this crisis because they lent the money for people to overbuy with, completely ignoring the fact that the banks were rational actors in this little drama, responding to government pressure to make credit available to those who would have – under normal conditions – been declined (CRA), knowing that the bank had no risk since these loans could then be sold to Fannie & Freddie with no recourse against the bank if they went upside-down. And, as an added plus for the pols, these transactions with FM2 were used to pad the balance sheets of the two GSE’s generating Million$ in bonuses for the cronies they had sinicured there – Franklin Raines had to give back $28MM in a court settlement, but he kept something in the neighborhood of $60MM in phony bonus money.

    The Government held a gun to the head of the bank, saying make this loan, and then paid them 100-cents on the Dollar for these bad loans – that’s almost as good a deal as the Fed loaning money to banks at 0.25% which the banks can use to purchase Treasuries at 3% making 2.75% on a transaction where they have zero risk.

    AD - RtR/OS! (4c0b43)

  89. There’s two parties here, and we can’t just blame one.

    Funny how people are happy to just blame the banks and continually label the irresponsible borrowers as victims though. This is compounded by doing so much with bail-outs and changing tenant laws to allow people to live in houses without paying for so long… all basically being paid for only by the banks and, eventually, the rest of us through taxes and such.

    It’s this one sided, non stigma view that Malkin was referring to. At least that’s how I read it.

    Miguelito (f443a7)

  90. “knowing that the bank had no risk since these loans could then be sold to Fannie & Freddie with no recourse against the bank if they went upside-down.”

    If the banks had no risk, then they won’t be upset when they don’t get their money.

    “Funny how people are happy to just blame the banks and continually label the irresponsible borrowers as victims though.”

    Talking about people happy to “just blame” the banks (ie, one party) is a nice reply to my line that “you can’t just blame one party.”

    imdw (d867f1)

  91. In Texas, and probably in a few other states, real estate borrowers are still liable for any deficiency if they default on their mortgages. It doesn’t make sense for those borrowers to default if they can avoid it.

    DRJ, In California the loan that is foreclosed upon, whether in first, second or third position, leaves no liability to the borrower. Any other liens are still payable but no longer secured by the foreclosed property. However, those liens must be collected in a judicial manner as California is a non-judicial, foreclosure state.

    An interesting note is that even an IRS lien is wiped clean off the property if the IRS doesn’t exercise its right of redemption after 120 days of the foreclosure. Of course the borrower still is left with the IRS debt, but it is no longer attached to the property.

    Property taxes are the most senior of any lien and always must be paid by the new owner of the prooperty, that is, the bank or anyone buying it as a third party at the court house steps.

    PC14 (82e46c)

  92. imdw,

    Apparently you believe that most people who purchase homes are just plain stupid, huh? The majority of homes that are purchased are purchased in full knowledge of the terms of their loan. The people are the ones either completeing loan applications with fraudulent information, supplying fraudulent documents or knowingly purchasing a home with a higher payment than they can afford. They sign every document and know full well what those terms are.

    Buyer beware & personal responsibility are apparently concepts foreign to you and instead you blame everyone else other than those who signed the documents.

    And yes, I am well aware who computes the credit scores…..based on information given to them by lenders.

    Whippet (a31089)

  93. Anyone else get the feeling that imdw feels duped quite often?

    JD (df3a77)

  94. “Apparently you believe that most people who purchase homes are just plain stupid, huh?”

    I think a lot of people who purchased homes at inflated values weren’t being very smart. And some of those people shouldn’t have been purchasing homes. I come to this conclusion because they were only able to purchase homes, and at such inflated values, because we were in a credit bubble.

    “Buyer beware & personal responsibility are apparently concepts foreign to you and instead you blame everyone else other than those who signed the documents.”

    I do believe that mortgage documents are signed not just by the purchaser, but also the bank.

    “And yes, I am well aware who computes the credit scores…..based on information given to them by lenders.”

    Yes. But how such information is counted in your score is up to the credit bureaus.

    imdw (842182)

  95. “…If the banks had no risk, then they won’t be upset when they don’t get their money…”

    Your awareness of the details of this debacle are wrapped up in that statement.

    The banks got their money as soon as they transferred this paper to the GSE’s; and at that point, washed their hands of the matter.

    Stupidity this great must be very painful.

    AD - RtR/OS! (4c0b43)

  96. imdw:

    Even if they are bankrupt?

    If a borrower is bankrupt, he or she still has to actually file bankruptcy — and that has a decidedly adverse impact on one’s credit rating.

    DRJ (daa62a)

  97. Anyone else get the feeling that imdw feels duped quite often?

    its unlikely that s/he/it possesses the intellectual capacity to do so, based upon observations here.
    if the ability for cognitive thought exists, it has so far been well concealed in previous postings.

    redc1c4 (fb8750)

  98. Stupidity this great must be very painful.

    apparently not, unless s/he/it is a masochist: the behavior continues.

    redc1c4 (fb8750)

  99. “… inflated values…”

    They bought “at market”; if they thought the price was too high, they should have looked elsewhere. But, since a lot of them were buying “on the come” (anticipating a continued run-up in prices) with the expectation of flipping the property to another buyer at a higher price (the “greater fool” theory), and were therefore speculators, they got caught when the market swung from a Bull-market to a Bear-market – they bought on-margin, and couldn’t cover their margin-call. Such swings catch speculators all the time.

    AD - RtR/OS! (4c0b43)

  100. “If a borrower is bankrupt, he or she still has to actually file bankruptcy — and that has a decidedly adverse impact on one’s credit rating.”

    If a borrower doesn’t have any money or assets, then they don’t really have to file bankruptcy in order for the bank to realize that filing a deficiency suit, and following up on collections won’t really cover their costs of the suit and the collections.

    “its unlikely that s/he/it possesses the intellectual capacity to do so, based upon observations here.
    if the ability for cognitive thought exists, it has so far been well concealed in previous postings.”

    I certainly didn’t get duped in the housing market. Then again, I also missed the opportunity to make a bunch of money on it.

    imdw (e66d8d)

  101. Comment by imdw — 3/21/2010 @ 10:03 am

    i deem thee a willfully ignorant idiot. be gone foul loon.

    redc1c4 (fb8750)

  102. “Talking about people happy to “just blame” the banks (ie, one party) is a nice reply to my line that “you can’t just blame one party.””

    imdw – It is good to see that you are actually in agreement with Malkin’s moralizing. What was that BS you were trying to peddle yesterday about her?

    daleyrocks (718861)

  103. Our cute little troll has confused a legal term – bankrupt – with an economic one – destitute!

    Perhaps they will cover that in his High-School Civics class in his sophomore year?

    AD - RtR/OS! (4c0b43)

  104. “I do believe that mortgage documents are signed not just by the purchaser, but also the bank.”

    And your point that the bank also signs the documents means what? The bank is also responsible for paying the borrower’s debt? The bank agreed to the terms as well as the purchaser? What? Of course the bank agrees to the terms since they underwrote the file and made the final approval determination. Their signature on the documents affirms their agreement to extend the credit under those terms…what else are you proposing that it means?

    Whippet (a31089)

  105. imdw:

    If a borrower doesn’t have any money or assets, then they don’t really have to file bankruptcy in order for the bank to realize that filing a deficiency suit, and following up on collections won’t really cover their costs of the suit and the collections.

    In that situation, a creditor may decide to stop collection efforts but there will still be an adverse impact on the borrower’s credit rating — because she or he defaulted on a debt. In addition, many creditors choose to proceed with obtaining a judgment. (In Texas, judgments can be valid for 10 or more years.) Today’s bankrupt borrower is tomorrow’s lottery winner, estate beneficiary, or retiree with retirement income.

    DRJ (daa62a)

  106. now now DRJ: its cruel to point out facts like that….

    redc1c4 (fb8750)

  107. idmw,

    “Yes. But how such information is counted in your score is up to the credit bureaus.”

    And exactly “how” do you think that information is counted in your score?

    From ehow.com

    “The FICO system utilizes a method that gives different weights to several facets of your credit history. These include payment history (35 percent of your score), amounts owed (30 percent), length of credit history (15 percent), types of credit (10 percent) and new credit (10 percent). ”

    Again, all based on information reported to them by others….your point?

    “I certainly didn’t get duped in the housing market. Then again, I also missed the opportunity to make a bunch of money on it.”

    So people were duped by purchasing a home at market value (at the time) which is a risk anyone takes when they purchase anything….interesting choice of words…duped. Which then means that you were duped into “missing the opportunity to make a bunch of money on it.” Again “missing the opportunity” is another interesting choice of words…you are smart because you weren’t duped to purchase but you don’t admit you were stupid because you missed an opportunity. Which are you smart or stupid? I know the answer but apparently you want it both ways….

    Whippet (a31089)

  108. “Heads I win, Tails you lose.”

    AD - RtR/OS! (4c0b43)

  109. Whippet – Thank you for describing your situation and frustrations on this thread. It sounds like you made a good faith effort to follow the modification guidelines as suggested and unfortunately got screwed.

    Trying to pin imdw with respect to what its comments actually mean is likely to lead to more frustration. Depending on the length of a thread, an intra-thread contradiction in position without acknowledgement is not at all uncommon for that commenter. Obfuscation, diversion, and pure trollery are the order of the day. It is pure performance art.

    daleyrocks (718861)

  110. Trying to pin imdw with respect to what its comments actually mean is likely to lead to more frustration. Depending on the length of a thread, an intra-thread contradiction in position without acknowledgement is not at all uncommon for that commenter. Obfuscation, diversion, and pure trollery are the order of the day. It is pure performance art.

    Comment by daleyrocks — 3/21/2010 @ 10:51 am

    Funny thing….totally agree with you which makes him sound more like a Paulbot than a Lib…however they are ususally interchangeable when it comes to debate.

    Whippet (a31089)

  111. “Obfuscation, diversion, and pure trollery are the order of the day. It is pure performance art.”

    In imd-double-doo’s case, it’s a slight variation on Karen Finley’s old “chocolate syrup on nude body” schtick.

    GeneralMalaise (20e943)

  112. “Again, all based on information reported to them by others….your point?”

    My point is that it is the credit bureaus that decide how to weight things.

    “And your point that the bank also signs the documents means what?”

    Means just what i have been saying: there are two parties, and we can’t just hold one responsible.

    “In that situation, a creditor may decide to stop collection efforts but there will still be an adverse impact on the borrower’s credit rating — because she or he defaulted on a debt.”

    I’m not arguing that going into foreclosure won’t have an adverse impact on your credit. It certainly will. I’m saying that there are times when it will make more sense to go into foreclosure than to try to avoid it. Specially those when the efforts to avoid turn out to be futile.

    “Again “missing the opportunity” is another interesting choice of words…you are smart because you weren’t duped to purchase but you don’t admit you were stupid because you missed an opportunity.”

    Oh I don’t think missing the opportunity was that ‘stupid.’ At the time I thought I was being prudent by avoiding purchasing a home when I couldn’t justify it just on wanting a place to live with a 30 year mortgage.

    imdw (8c921e)

  113. >“And your point that the bank also signs the documents means what?”

    Means just what i have been saying: there are two parties, and we can’t just hold one responsible.

    And exactly what is the lender responsible for? Allowing a citizen of this country to decide for himself that he wants to purchase a home, the bank deeming his credit and income sufficient to do so (of course the guidelines for deeming what is sufficient credit and income are predeterminied by the GSE’s ie, your liberal government), and extending the credit based on the borrower’s acceptance and willingness to repay the terms of the agreement they signed? Again, you did not answer….what is the lender’s additional responsibility to that borrower in terms of payment or something else you fail to mention?

    Oh I don’t think missing the opportunity was that ’stupid.’ At the time I thought I was being prudent by avoiding purchasing a home when I couldn’t justify it just on wanting a place to live with a 30 year mortgage.

    Comment by imdw — 3/21/2010 @ 11:10 am

    Talk straight then….If you couldn’t justify purchasing a home then there was no opportunity to be had therefore no opportunity missed.

    My point is that it is the credit bureaus that decide how to weight things.

    Spell it out please…..are you suggesting a conspiracy?

    Whippet (a31089)

  114. “And exactly what is the lender responsible for? ”

    The risk that they won’t get their money back.

    “Spell it out please…..are you suggesting a conspiracy?”

    No I’m suggesting they’re the ones that decide how to use the information from lenders.

    “If you couldn’t justify purchasing a home then there was no opportunity to be had therefore no opportunity missed.”

    That’s an odd way of looking at it. I couldn’t have justified buying it as a home. It was still an opportunity I had, and would have been a good investment — one which would have been justified had I taken the risk. You don’t have to tell me what life was like back then…

    imdw (05d41e)


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