NOTP: More bad news at a bad time (Subprime lenders are getting nasty )

[Pirate Smile]

NOTP - New Orleans Times-Picayune

More bad news at a bad time
Subprime lenders are getting nasty

Sunday, December 11, 2005
By Bill Walsh
Washington bureau

WASHINGTON -- Even in the best of times, a letter with the heading "notice of default" would be alarming. But for Barbara Smith, 67, the letter came at the worst time of her life.

The floodwaters from Hurricane Katrina had laid waste to the Lower 9th Ward home. She had relocated temporarily to Kentucky and was trying to figure out what to do next when she got the Nov. 14 notice from Green Tree Servicing LLC, her mortgage company. It told her to "cure the default" of $792 within 30 days or the company would foreclose and report her to the credit agencies.

"We contacted the company (and a representative) was very hostile and said he didn't care about our situation and we better send in the payment," said Adrienne Dowden, Smith's daughter. "Of course we did. He said we must continue to pay or my mother will lose her home."

While many mortgage lenders are giving flooded-out homeowners as much as 18 months to resume payments, others -- especially subprime lenders who serve low-income and minority borrowers -- are turning up the pressure to get their money. Instead of getting extra time, these borrowers are getting strongly worded letters and phone calls saying their loans are in default and it is time to pay up.

http://www.nola.com/business/t-p/index.ssf?/base/money-0/113428616376920.xml

[Pirate Smile]

1. more details

"Still, the Louisiana Office of Financial Institutions reported earlier this week receiving "a significant number of complaints" from homeowners saying that lenders who had granted a deferral for payments after the Aug. 29 hurricane were now demanding as many as four months worth of payments in a single lump sum.

The pressure, according to Darin Domingue, deputy chief examiner at the regulatory agency, isn't coming from mortgage companies whose loans are insured by the federal government, such as the Federal Housing Administration, the Department of Veterans Affairs, Fannie Mae or Freddie Mac. Rather, he said, it is generated by lenders whose loans are not backed by the federal Treasury and by subprime lenders who may face financial pressure from private investors.

-snip-
Subprime loans are aimed at people who, because of a subpar credit history, are unable to obtain conventional mortgages. Generally they are charged higher rates because of the greater risk they supposedly represent. They also tend to be disproportionately African-American, according to a Sept. 22 study by the community advocacy group ACORN.

Its report, which was subtitled "How the Subprime Mortgage Industry is Sand-bagging Katrina-affected Homeowners," drew on federal government data. It found that 37.5 percent of home mortgages to African-Americans in metropolitan New Orleans last year were subprime with rates above 8 percent. At the time, conventional 30-year mortgages were about two points lower. African-Americans in the eight-parish region got subprime loans at a rate four times higher than white borrowers, the report found."

[okieinpain]

40. this also could be a land grab...

[neverforget]

2. Words fail to convey how sick this is.

:mad: :puke: :wtf: :argh: :grr: :nuke: :cry:

[tularetom]

3. Right now this deals with low income

residents of NO, but I can see the same scenario applying to residents of overpriced. mortgaged to the hilt and beyond, McMansions all around the US as high paying jobas are lost or outsourced and people begin to default on interest-only loans. Banks and other lenders do not want to own property and they don't want to sell it at a loss so they will go to extreme lengths before foreclosing, but at some point they need to cover their own ass with their depositors and shareholders. A lot of "middle class" Americans are in for a big surprise and nobody will be happy with the result.

[Nay]

5. Although it is normally true that "banks don't want to own property

or sell it at a loss," I do not think that this will apply in NO. Those subprime lenders are seeing the foreclosures as a big opportunity -- an opportunity to own prime property, which they can sell to developers, who will be helped out with taxpayer money. The $$ will be good, and they don't even have to bulldoze the houses themselves. The taxpayers will do it.

[AnneD]

37. I see more and more of these subprime mortgages

being sold to the middle class. These are the adjustable rate jobs, for example, that are marketed so heavily now. And when you have a downturn, like a recession, they will repo you in a heart beat.

[havocmom]

4. Sounds like the mortgage holders are planning on being land holders

come rebuilding time in NOLA. Once all the poor (and, probably, most of the middle class) have been foreclosed and force out, look for a new city to rise up out of the muck. The new city will be a playgound for the rich with only a handful of working class folks who 'know their place' to serve them.

[reprobate]

6. Good for the rich. Let them sicken and die from the toxins in the ground.

Many who should know have said that the entire area is now toxic and should be treated as an uninhabitable land for the foreseeable future. Even removing the top couple of meters wouldn't help much since the toxins have seeped into the ground water, and wells will be toxic also. Plus, the implausibility of finding a place to put all those millions of meters of contaminated soil has everyone scratching their heads.

For myself, I say let the rich, who have already ruined this nation, die in pain and anguish, like they have inflicted on the rest of us. No one deserves it more, except maybe Boy Bush.

[pitohui]

20. there are no toxins here

you should be ashamed of yourself

first for spreading the lie that the land is poisoned when it is not, and second for trying to dishearten the many good people who have already returned and started rebuilding

what is wrong w. people?

there are not any great numbers of rich people in new orleans, it is one of the poorest cities in the nation, so even if you hate all rich people as it sounds like you do, then you are ill-wishing on the people who do the hard dirty work of the world -- who ship YOUR food, who pump and refine YOUR gas

you should think again before saying such cruel things, there are many people on this board who live here and don't appreciate lies being spread about how our land is poison and shouldn't be rebuilt

the zone of contamination is not in new orleans but in st. bernard parish, and even then i am v. careful when talking to the many displaced people of st. bernard, never to say that it is hopeless and that nothing can be done, this is people's entire families & communities you are playing with

[The Flaming Red Head]

43. Baton Rouge is even worse. Chemical spills once a month

CC lockdowns all the time and nobody gives a damn.


Edited for link http://theflamingredhead.blogspot.com/2003_08_03_theflamingredhead_archive.html

[0007]

7. You have a good handle on the way it will be played out!

Was in Houston this past week. Still many New Orleans folks in Houston and many have no plans on returning. The poor get screw and the wealthy take advanage of the situation with no qualms.

[prolesunited]

8. Yup, that's exactly

their vision for the future. Couple that with the fact that they have lots of temporary housing sitting unused in other states, but aren't sending it to that area. They don't WANT those people back.

And, those they can't screw out of their land will face the new eminent domain laws that favor big developers over individual land owners. It was bad enough when government could force you out for their projects, now they will do so at the behest of big corporations who want to build projects. I'm sure this law will come into play in this situation.

[AndyTiedye]

9. But Who Would Pay Big Bucks to Move into There?

They want to gentrify that area and sell condos for big bucks, but who would buy them?
Who wants to pay $$$$$$ for a condo that's going to get flooded out the next time a hurricane comes through?

[prolesunited]

10. Are you kidding?

Look at the multimillion dollar homes that get buried under mudslides in California, the coastal cities in California, the fire-threatened back-country areas. As long as people have money and have insurance or the government to bail them out, they will be willing to trade safety for prestige and fabulous views. Plus, who says they won't fix the damns once "something worth saving" is built in the area?

[sandnsea]

11. That humongo levy project will go in

Are you kidding? Once they clear the area of the poor and the minorities, no expense will be spared to "save New Orleans". Most foreclosures should be completed in another month or two, I look for huge projects to be announced, oh, around Mardi Gras time.

[shanti]

14. not to worry

with all the money that will be invested (condos, etc), it WON'T flood again. they will make damn sure of that!

[pitohui]

23. if you really believed that

then why wouldn't you want the developers to come?

the people i know who drowned when the london avenue floodwall was breached were real people, they died just as dead as anyone you will ever know

if it takes donald trump to come in and get the gov't to built a proper levee instead of short-sheeting the levees, then why wouldn't you want him to come?

do you want us to be poor and at risk forever?

because right now there isn't a damn bit of evidence that the federal gov't will release any money to repair our levees, much less improve them, legislation is stalled in congress, bush don't care, rove is documented to have led the attack on our governor

you said--with all the money that will be invested (condos, etc), it WON'T flood again. they will make damn sure of that!

[shanti]

27. what i meant....

is that the land will be TAKEN by the developers and it won't be used FOR the benefit of anyone but the rich. sure, if it helps others, but i think that's an afterthought for them, really. they help their own (the wealthy). if the RE investors are serious about rebuilding NO, they WILL make sure their investments are protected, just saying.

and of course, i don't wish for you to be poor and at risk forever, my heart goes out to all the NO katrina victims. i feel your pain! i'm on your side!

[pitohui]

32. it won't be taken by developers

that is a scare story being spread around

the only land being "taken" is the land spoiled by the oil spill at murphy oil in st. bernard parish & they are paying above market for it from what i've heard, one of my workers said his mom's house was $170 pre-K, it was destroyed by the oil spill, murphy has offered her $220K -- not because they are going to develop it, they can't, they need the extra buffer zone around the refinery


ain't gonna be no disneyworld across the street from murphy oil

IF some land is taken in new orleans east (not in new orleans proper and not in 9th ward), it will be because the land is going back to wildlife refuge to provide a buffer of wetlands, again, not for any disneyland...and in any case no decision yet has been made on the fate of new orleans east, which is not historic but which was developed in the 1970s and prob. shouldn't have been

and i know you are trying to be helpful, i know you are not the enemy, but sometimes it's hard to get across ideas on the internet w.out being tactless somehow, i observe a lot of scare stories being spread by well-meaning people but it's hard to correct a rumor without being somewhat forceful in my statements

donald trump was planning to come to new orleans pre-K, right after the storm he claimed he was still coming, but since then nothing, without proper levees, the hoped-for development is going to slip away, this storm was NOT good for the wealthy, it was NOT good for the developers, it was NOT good for anybody

[havocmom]

18. Developers will turn it into an adult theme park sort of resort town:

'What happens in The Big Easy stays in The Big Easy' sort of place, mark my words.

Not every spoiled rich brat wants to risk travel abroad for a Neil Bush type experience.

[pitohui]

21. shh andy, you're spoiling a perfectly good attack of paranoia!

i wish more people would stop & think before they open mouth, insert foot

don't they realize some of the rumors being spread are quite hurtful?

[alfredo]

15. bush alluded to a New Orleans that is better than before.

Now we need to figure out what he meant by "better." All we can go on is past performance, and the ideology of his trusted handlers.

[pitohui]

19. no it sounds like subprime lenders are screw-ups

if the lenders wanted to own property, they could buy the property cheaper than going through a lot of weird hoops & ending up with a lot of worthless property they can't resell

please don't tell me i'm the only adult human being who remembers the savings & loan crisis, sure, 1991 was the last century but it wasn't that long ago, lenders that ended up w. foreclosures ended up busted themselves, the resolution trust company was temporarily the second largest owner of residential real estate not just in greater new orleans area (where we had 50,000 boarded up homes!) but in the entire united states of america, we were steps away from a second great depression until clinton stepped in to clean up this huge, huge mess

lenders don't get rich making bad loans, they get busted

and no person or institution of means is going to want to invest in worthless swampland that doesn't have proper levee protection

please, i beg you here on democratic underground, please stop spreading these conspiracy theories, it does not serve the people of new orleans, it serves the freepers who would have you believe that there is no reason to help us here and that only the wealthy are still living here and we can be forgotten


it is clear to me, as i would think it clear to most people who read this long detailed story carefully, that subprime lenders have shitty procedures & their computers are sending out the same crap programmed letters they would have sent out any time a bill is late, while the better lenders with better programming have already deferred people's notes -- in some cases for 18 months -- in order to avoid creating a crisis that would land them w. thousands, or tens of thousands, of worthless piles of mold

if you read to the end, you will find even a woman who has paid her loan off in full is still getting dunned, it is simple stupid computer era caused by unprecendented confusion

it is not a land grab

[havocmom]

26. Oh, I remember the S&L (and dear Neil Bush's part)

but I honestly believe NOLA will rise again, as a playground for the rich. Those deeds not worth much... NOW. In a few years? Look for some serious gains.

[pitohui]

33. well i hope you're right abt the serious gains in future

new orleans and much of the surrounding area completely missed the so-called "housing bubble"

it would be nice to have my home be worth something after having gone to all the time and effort to repair it after two natural disasters -- both wind, not flood, so it isn't like i can just walk away and be mitigated

it would be good to see the area prosper

it is not right to wish that people remain in poverty forever because it seems more "colorful" to the visitor

[havocmom]

39. Sadly, I fear it is not the area which will prosper

With the OK to pay below prevailing wages AND the hiring (and screwing over) of undocumented workers already, I fear only the Big Developers will cash in. The worker bees will get stung.

And I don't wish people to remain in poverty to seem colorful. There will be people brought in to play the part for the tourists of the future, I fear. The poor of today have already been written off by the powers that be.

[JNelson6563]

12. Who is surprised?

These guys are predators.

Julie

[liberalhistorian]

13. Why the hell should people have

to continue to pay, sometimes for years, for houses that were destroyed and that no longer exist? Especially considering they now have to find a way to pay for their new housing. If I were one of these people, I'd tell the fucking bloodsuckers to kiss my ass, go ahead and foreclose and put it on my credit. I would have already lost everything I had, anyway. If the house is destroyed, they ain't gettin' much anyway.

[NVMojo]

16. I'm with you on this liberalhistorian.

[alfredo]

17. they are ensuring civil unrest.

Soon or later the people will see that they cannot get justice within the system.

I hope the Republicans are thrown out of office before that happens.

[pitohui]

25. you just don't get it

you are assuming that everyone who lost their house was uninsured, has no belongings of any worth, and is young enough to just walk away & start over

most homeowners do have at least some insurance, the problem is that many insurers have not yet paid, so the homeowners in turn cannot yet pay the mortgage, the plan is not to default and be left w. nothing, the plan is usually to delay payment until the insurance comes through, the job comes back, and they can again make payments and get back to where they started

most people are honest and don't want to steal anything, they just want to get their lives back, however, at the moment, they may need several months to a year or even 18 months to get back on track financially and be ready to pay

a big, big, BIG problem is insurers not paying in timely fashion

would you be happy to walk away & lose everything financially because your insurance check was delayed for many months and the lender got twitchy? would you happy to lose everything because you were out of work for a year -- as an example some of my friends are teachers in new orleans public school system and they don't expect to work again for months or maybe a year yet when they are
working again they'll be able to meet their obligations, they just need space to breathe right now

fortunately, MOST lenders have noticed there is a hurricane, and these glitches can be worked out, it is to no one's benefit to foreclose on somebody when that person, if given sufficient time, could eventually repair the property and pay off the note in timely fashion

[newspeak]

28. so, is there any type of charities

donating monies to families to keep their homes? I don't want to do Red Cross because they might not spend it on what it was intended.

[okieinpain]

41. yes it can be of a benefit. owning thousands of acres that is going

to be part of one of the biggest rebuilding projects in america. someone at one those fly by night places just woke up and realized this. now the rush is on.

[SoCalDem]

30. the problem is that they forfeit any equity they may have had

Once they default, they can have the property "sold" for little more than what they are behind..

For instance..


The $792 payment could be for a loan in year 25 of a 30 yr mortgage..Perhaps that person's house "was" appraised at $250K..

They are screwed bigtime if they cannot get some insurance intervention soon or some help.. What they have now, is worth NOTHING, so ordianry people are not hanging around to offer them a fair price..

The vultures will circle until foreclosures start, and they will pick these properties up for pennies on the dollar.. They will then apply for and GET federal money to "renovate" the area..

[pitohui]

34. you're correct, equity is a big concern

you're getting it, homeowners do not want to lose their equity, both their sweat equity in the repairs if they had an older house (old houses just need more maintenance here to keep ahead of termites, etc.) and also of course the financial equity

however, pennies on the dollar is not quite accurate, i have a resolution trust corporation house, it had to be sold at so-called fair market value, you will find the same is true with hud houses and other gov't foreclosures, they are not allowed to give away the houses away for a song, believe me, i tried, but those days are long long gone when you get a junk house for nothing and put your work into it and make it worth something! in the 80s and early 90s i looked at many badly damaged HUD houses (many) priced FIRM at $40K in gentilly in a friend's neighborhood where nicely maintained houses were going for $55K -- in other words, if you properly repaired the house, you'd be paying MORE than if you'd just bought a non-foreclosure house, HUD was upside-down

now the incentives can be nice, for instance, the RTC paid all of my closing costs, which amounts to several thousand dollars or even five figures these days, they did significant repairs including a new roof, they did the full first initial termite treatment and got a termite contract, and several other benefits, however the house itself was nowhere near pennies on the dollar, it wasn't even a half off sale! :-)

with katrina, the incentives i know abt so far will be very low interest loans, below the usual interest rate for such loans plus grants will be available for raising houses in proven flood areas

however, it is false to say that the gov't is allowed to sell the properties themselves for pennies on the dollar, they aren't

i think in the 50s or something, this may have actually happened that people bought houses at gov't auction for pennies on the dollar, no more, the law is different now, attend a few auctions or gov't sale, they are not giving anything away, the houses i'm aware of that sold for $1, the buyers had to PROVE they had $250K or up to put in escrow for repairs

there's no free lunch anymore if there ever was

[SoCalDem]

42. Under "normal" circumstances, you are right, but I fear

that large swaths of "land" will be all but ceded over to 'friendly" real estate companies for them to re-develop. If months and months go by, people who still owed some money on their homes, and cannot keep up the payments will be losers no matter how it shakes out. the banks will foreclose, and in back-room deals, will parcel out the property to their pals..

lots of folks who owned their homes outright, and were poor, may not have even had insurance.. Once there's no mortgage, I know of no law requiring insurance...lots of these people are elderly and poor and cannot afford to rebuild.. all they have left is the sunken, polluted soil that their homes once sat on.. There is going to be a lot of "surreal estate" available soon, so those plots of soil may be the last to be purchased..

[lovuian]

22. I'm waiting for the Poor House to return!!!

The bankruptcy laws are going to be such a disaster for Americans!!!

[liberalhistorian]

31. Yes, indeed, they are.

Congressional Dems attempted to pass a law extending the time that the new bankruptcy laws would take effect for Katrina victims, recognizing their special circumstances in a humane attempt to give them some breathing room, but guess which party's members objected and fell all over themselves to reject it? Then guess which party's members were anxious to begin discussions on how to protect insurance companies affected by Katrina yet not at all in a hurry to discuss ways to help Katrina victims? Yeah, I'll give you three guesses and the first two don't count. And brickbats to the Dems who went along with them. Welcome to the new Robber Baron Age.

[upi402]

24. Debtors prisons! A new sector for the prison industry!

Hey, it's not just for black folks anymore!!!

[The Flaming Red Head]

44. What'd you call hot check charges

Most are written for groceries to feed kids.

[allisonthegreat]

29. Even after Hurricane Hugo

Which was a walk in the park compared to Katrina and Rita..car loans, and home loans could be delayed for awhile til people got back on their feet..I believe it was about 90 days! Some of these fly by night mortgage companies are the world's worse!

[pitohui]

35. the loans are going to be delayed

the point of the article is to get these subprime lenders to straighten up and treat their customers more respectfully but it's clear to me a lot of these bills are going out by mistake because subprime lenders are just sloppy, at the end of the article it says a lady is being dunned who already paid off her note, clearly just a stupid mistake by a bad computer programmer or operator

the loans were delayed 90 days by law and most are voluntarily delaying far longer -- not just houses but indeed even cars

the bank don't want your house, they want your money, otherwise they could have cut out the middle man and become a real estate enterprise to begin with

people in other areas have some whack ideas, real estate in new orleans is not very valuable, we never had any housing bubble, nor are the wealthy people of the world conspiring to get our land, i'm sure if a lender wanted to buy some worthless swampland with no levee around it they could have done it a lot easier than sit on their hands and pray for a bad storm to hit just right

that said, if a rich person wants to come wave an envelope of money at me to get my house, step right up, make your offer, i'm all ears, there is certainly a price at which i will be willing to sell

[katty]

36. mean AND rude?! disgusting, show a drop of compassion

[NorthernSpy]

38. what should our society do to usurers and similar bloodsuckers?

This kind of parasitism has been rampant for some time, though it took the hurricane to bring it to the attention of the media. Usury (as it used to be called) is ruining our lives as individuals, and ruining our country as a whole. Debt is killing America.

The ones who try to squeeze a fortune out of other people's tragedy and desperation -- what should our society do to these psychopaths? What do they deserve?

[KamaAina]

45. Foreclosure issue addressed here in Slate

http://www.slate.com/id/2132094/

With the passage of the consumer-unfriendly bankruptcy law and the cram-down rampant, the personal finances of those with limited means are getting more precarious. But even in this Scrooge-y world, there are pockets of sweetness and generosity. At least one group of kind-hearted folks in the finance industry is willing to give customers a break when things don't go their way: America's heart-of-gold mortgage lenders, who are behaving with curious benevolence toward suffering clients. Even as housing prices have risen and grown more unaffordable, and as bankruptcy filings have soared, foreclosure rates have fallen. According to the Mortgage Bankers Association, the foreclosure rate has fallen from 1.49 percent in the third quarter of 2002 to 1 percent in the second quarter of 2005.

It's not very surprising that the industry is cutting slack to borrowers in the region affected by the hurricanes. Government-sponsored lenders Fannie Mae and Freddie Mac have extended through Feb. 28 a moratorium on foreclosures in the Gulf Coast. Freddie Mac also told the companies that service the loans it makes "not to report hurricane-related delinquencies to credit agencies through February 28" and advised them "to forgo collecting penalties or late fees as mortgages are reinstated." Private-sector lender Wells Fargo last week said that through the end of February, it will "not assess late fees, file negative credit reports or place collection calls" to customers with hurricane-damaged homes....

Homeowners today are plainly stressed, especially those with less-than-pristine credit. According to the Mortgage Bankers Association, in the second quarter of 2005, the delinquency rate for residential mortgages was 4.34 percent. Some 1.83 percent of loans were classified as "seriously delinquent," meaning that payments were either 90 days past due or the loan was in the process of foreclosure. The delinquency rate for borrowers with adjustable-rate mortgages was 10.04 percent, and the delinquency rate for subprime fixed-rate borrowers was 9.06 percent. In order for the rate of home ownership to rise as it has, more marginal buyers have been drawn into the market. And they tend to fall behind on their payments rather quickly.

The delinquency rate for subprime borrowers would seem to set the stage for a huge rush of foreclosures. But the big lenders have plenty of (mostly short-term) reasons and incentives to avoid taking back the houses of their nonpaying customers. And they're doing everything they can to keep their customers in their homes—even if they're not paying the mortgage on time.

[gulfcoastliberal]

46. Thanks Sen. Reid, Biden, Carper, Landrieu, Akaka, Bayh, Nelson, Salazar

Baucus, Bingaman, Byrd, Conrad, Johnson, and Stabenow. Thanks for fucking over the American worker by voting for bankruptcy "reform" - workers whom you supposedly represent. Oops, guess I'm just being too ideologically pure. But this legislation - which Bill Clinton vetoed - would not have passed without the help of all these sellout dems. I say we rename "give em hell harry" to "give em foreclosure and homelessness harry" Reid.

Hey Harry, where are the rsults from "Phase 2" on the iraq intelligence investigation? Are we going to get answers or are you just allowing the repukes to let it dissapear into the memory hole?

:rant: