Deadbeat: Not Just A Circumstance, A State of Mind

Tim Cavanaugh | July 1, 2009

Lose what little faith you still have in your fellow Americans with the new Mortgage Metrics Report. For the first time, the quarterly report [pdf] from the Office of the Comptroller of the Currency and the Office of Thrift Supervision includes information on redefault rates for modified mortgage loans.

That is, lenders are increasingly offering supposedly distressed borrowers substantial reductions in principal and interest payments. (See page 25 to see how rapidly these modifications are becoming much more charitable to the borrowers.) Redefault data track how many of these renegotiated loans end up back in trouble. There's a wide variety in types and degrees of trouble — everything from 30 days' tardiness on payments to completed foreclosures.

But one pattern emerges when you add up all the redefaults per quarter and compare them to the total number of loan modifications: When you take deadbeats and give them a free opportunity to get out of contractual obligations they willingly signed before God and country, a fairly reliable majority of them — and often a fillibuster-proof 60+ percent — end up deadbeating again.

In general, the more loans you modify, the higher the percentage of redefaults: In the first quarter of 2008, 68,001 loans were modified, and 40,206, or 59 percent, of those have ended up 30 days late again, or worse. In the first quarter of 2009, 185,156 loan mods were done, and of those, 120,067, or 64 percent, ended up in trouble. (Check my math: to get a total-in-trouble number I'm adding up "30-59 days Delinquent," "60 or More Days Delinquent," "In Process of Foreclosure," and "Completed Foreclosure." To be sporting, I'm leaving "Short Sale or Deed-in-Lieu of Foreclosure" out.) 

If there's any good news in this, it may be that while the total number of loan modifications is skyrocketing, the percentage of redefaults is increasing sporadically relative to total loan mods, rather than growing in a straight line. So in the fourth quarter of 2008, for example, only 46.9 percent of modified loans ended up back in trouble.

But even that isn't really encouraging, because some of the "trouble" categories were artificially depressed in that period (through, for example, statewide foreclosure moratoriums in effect in some of the most deadbeat-rich areas). Also, the terms of loan mods are getting much more generous: Where last year banks tended to offer only small gestures like maturity-lengthening or a slightly better interest rate, now they're offering to reduce principal, pay all closing costs for new mortgages etc.

So if these borrowers really are honest citizens who just need help getting back on their feet, the percentage of redefaulting loans should be going down, not up. That's not the case, because they are not honest citizens. They're deadbeats, and it's time to stop pretending they can be anything else.

Comments

|7.1.09 @ 4:32AM|#

Conversely, we should bear in mind that many "deadbeats" may be people who got perfectly reasonable mortgages but who are very adversely affected by the present recession. Or were employed by organizations that are disproportionately affected by same, e.g. journalists.

So, maybe language that sounds a little less like hatin', Tim?

KingShamus|7.1.09 @ 5:38AM|#

"But one pattern emerges when you add up all the redefaults per quarter and compare them to the total number of loan modifications: When you take deadbeats and give them a free opportunity to get out of contractual obligations they willingly signed before God and country, a fairly reliable majority of them - and often a fillibuster-proof 60+ percent - end up deadbeating again."

Man, I am so stupid trying to actually pay my bills on time. Why don't I just wait for a hand-out like every other dipshit loser in America?

|7.1.09 @ 6:26AM|#

Did Tim read that the report is "based on datta from loan servicing companies that manage 64% of all first-lien US mortgages?"

Does he have any clue as to the real world performance of mortgage servicing companies? If one has any experience, on the ground, with mortgage servicing companies, particularly in the last three years, one would laugh at the prospect of relying upon ANYTHING from mortgage servicers. I can't tell you how many times in the last three years where I have not got a straight answer, or even any answer, to basic, fundamental questions posed to the third world customer service departments at morgage servicers.

For example, very simple questions like who is the noteholder or where is the note that proves that Citibank or BOA is the noteholder on the mortgage in question, very often, can not be answered. If a mortgagor seeks to discuss loan modification, good luck doing so with mortgage servicers. It ain't happenin'.
Typically, one is dealing with those that are several fries short of a happy meal and not exactly committed to customer service excellence.

The upshot: Tim's rant is a joke.

Tricky Prickears|7.1.09 @ 6:30AM|#

You gotta give that guy points for creativity. I'd slip him a couple bucks.

|7.1.09 @ 6:30AM|#

Furthermore, any discussion of deadbeats should begin with the baniks themselves. A rent seeker, by definition, is a deadbeat-like any other socialist.

SIV|7.1.09 @ 6:37AM|#

Deadbeats are people who don't pay what they owe.
The "reason" they don't pay is irrelevant.

Tricky Prickears|7.1.09 @ 6:40AM|#

Typically, one is dealing with those that are several fries short of a happy meal and not exactly committed to customer service excellence.

That seems to be a growing trend in all sectors. It's kind of hard for these people to to answer direct questions when they are being fed responses from a computer screen.

But hey, fear not. We can all start trusting our bankers again!

Tricky Prickears|7.1.09 @ 7:01AM|#

Delinquencies and foreclosures involving prime mortgages - typically held by people with the best credit - increased more than 20 percent in the first quarter over the fourth quarter of 2008 "as economic pressures continued to weigh on homeowners," the Office of the Comptroller of the Currency reported.

More deadbeats. Or, I guess you could call them "first time" deadbeats.

Some Guy|7.1.09 @ 7:33AM|#

These mods mean extending the time it takes to foreclose, too. If I was planning to walk away from a house, I'd definitely get a loan mod first to get a few more months of free rent out of it.

If you're going to be a deadbeat, you might as well do it efficiently.

|7.1.09 @ 7:41AM|#

When did Cavanaugh become such a pompous dickhead?

Let me unask the question.

|7.1.09 @ 7:47AM|#

Shelby, at this point the term "journalist" gives rise to as much hatred in the depths of my soul as "deadbeat". Have you read a newspaper recently?

|7.1.09 @ 7:58AM|#

Okay as one of the 'deadbeats' let me give you something to ponder. We live in Florida, bought in 2005, nothing extragavant, a three bedroom home. Well due to the destructive hurricane season our homeowner's insurance tripled. Our taxes did as well, due to the booming real estate market. When we closed on our home we had reasonable payments well within our income. One year later, not so much, so I took a second job to help. Well when your mortgage nearly doubles you can only stay afloat for so long. Our lender has only offered a repayment, no real adjustment and we've paid out of pocket for inspections to lower the cost of our homeowner's insurance. If we were to buy now our house would be affordable because the value has tailspinned. We work really damn hard and we get lumped with the "deadbeats".

|7.1.09 @ 8:35AM|#

So people who don't take responsibility for their debts continue to fail to take responsibility for their actions after they have been given some welfare? No shit.

|7.1.09 @ 8:49AM|#

Misty,

I thought Florida had the rule where you pay the property taxes that the house was valued at when you bought it?

As for insurance, you live in Florida, its a roll of the dice every year whether you get hit by a hurricane, so I can't feel a whole lot of sympathy there. Just goes to show that proper preperation could have prevented piss poor performance.

|7.1.09 @ 8:52AM|#

People with huge student loan debt and low wages get their gift from the Feds today: Income-based repayment is now in effect.

|7.1.09 @ 9:35AM|#

I'll remember all these games w/ mortgage defaults next time some liberal tries to claim his favorite govt mortgage program has a 'low' default rate.

|7.1.09 @ 9:37AM|#

I thought Florida had the rule where you pay the property taxes that the house was valued at when you bought it?

You're thinking of California.

perilisk|7.1.09 @ 9:40AM|#

"Deadbeats are people who don't pay what they owe.
The "reason" they don't pay is irrelevant."

It isn't when considering whether to modify the loan or not. Someone who was borderline on being able to pay may start paying again, but someone who lost their job doesn't magically get their income back just because they got a slightly easier loan.

|7.1.09 @ 9:52AM|#

I thought Florida had the rule where you pay the property taxes that the house was valued at when you bought it?

Not exactly.

Under the "Save Our Homes" Amendment, property taxes cannot be raised above a certain percentage each year. Until 2008 it was not portable however and still does not apply to new buyers AFAIK.

During the boom a lot of people bought up using the proceeds from selling their old houses and a lot of new buyers entered the market. The move-uppers failed to anticipate the tax increase on the new more expensive house since only the taxes paid by the previous owner showed up at closing and that rate applied for the rest of the year. The new buyers got one hell of a shock when the next year's tax appraisal came. The same thing happenened to new buyers.

It never occured to anyone to consider checking what the new rate would be when they purchased. It occured to me that this would happen though, and it's one of the reasons I stayed put.

Florida cities and counties reaped a huge revenue windfall during the boom and went on proportionate spending sprees. The one's that applied the knife early and cut spending are the one's that are now in the best shape.

|7.1.09 @ 9:54AM|#

I see some superfluous apostrophes in my last post. Please pretend they aren't there.

|7.1.09 @ 9:56AM|#

Who's the bigger idiot? The deadbeat who borrows money he can't pay back, or the lender who lent him the money?

Answers itself.

When the government talks about bailing out homeowners, what they really mean is bailing out the lenders.

Frank|7.1.09 @ 10:03AM|#

"Who's the bigger idiot? The deadbeat who borrows money he can't pay back, or the lender who lent him the money?"

Exactly.

Or how 'bout the corporatist arrangement of student loans, where non-creditworthy candidates like myself are allowed to borrow 90k. Even more beautiful is the fact that student loans, once consolidated, lock in that interest rate and can NEVER be refinanced. (Which was not disclosed during the consolidation process--maybe somewhere in small print?) Nice to have 50k at 8%.

I'm a proud deadbeat to a corporatist system that plays by non-market rules.

|7.1.09 @ 10:11AM|#

Frank, I'm stunned at your ability to bitch about a system that handed you ninety thousand dollars -- by request -- that you are proudly refusing to repay while maintaining your property and freedom.

Pretty convenient to find the arrangement so disagreeable after spending all the money, no doubt.

Frank|7.1.09 @ 10:16AM|#

Oh, don't you worry yourself into a tizzy, FrBunny. I will repay my loans. If I don't, the government will take it by force by garnishing my wages, as the government already does for taxes, taking more than a third of my paltry salary every month and leaving me with even less money to make my payments. In a non-corporatist system, when someone becomes insolvent, they are allowed to file for bankruptcy. Student loans, however, cannot be included in bankruptcy proceedings, so again, don't fret FrBunny. The government will get blood from this stone.

|7.1.09 @ 10:49AM|#

They're deadbeats, and it's time to stop pretending they can be anything else.

I'm sorry, Tim, but you've just crossed the Cranky Old Republican Line. The longer you stay there, the harder it is to return.

But if you decide to stay, say 'hey' to my extended family. Oh, and try to hang out with the Gold Bugs -- they're a hoot!

jasno|7.1.09 @ 10:51AM|#

Student loans are like military enlistment - too much responsibility handed to someone who's decision making capability hasn't fully developed yet.

Misty - what kind of libertarian are you? You should have just liquidated your gold reserves. You have gold, right? I thought all libertarians did... like the mythical South Park "Jew-Gold"... or you could've grown pot! Either way, you should have known what was coming.

Go form an anarchus collective in some unclaimed swamp. In a few years Reason will write articles praising you for standing strong against the evil government workers trying to destroy the swamp-rat-and-methamphetamine-based economy you've created. Maybe you'll even get IJ to take your case.

er.. sorry.. been reading Reason too long.

jasno|7.1.09 @ 10:52AM|#

Oh, and I almost forgot - fuck you Tim. It's narrow-minded bitching like this that will keep libertarians out of power for good.

|7.1.09 @ 10:55AM|#

Or how 'bout the corporatist arrangement of student loans, where non-creditworthy candidates like myself are allowed to borrow 90k.

Perhaps non-creditworthy people shouldn't be borrowing at all?

Perhaps the mere availability of credit does not confer an obligation to take out a loan?

Perhaps people who borrow should be responsible for repaying their loans according to the terms of their loans, and should be responsible for understanding what they sign?

Perhaps no one should expect to refinance a loan that, according to its terms, cannot be refinanced?

Just sayin', is all.

Granite26|7.1.09 @ 10:56AM|#

I lived in Florida all my life, and I've long been amused by people complaining about the insurance costs. Insurance is based on risk, and there's a lot of competition. If your insurance rates are high, it's because you're in a high risk area. Move a few miles inland!

Well when your mortgage nearly doubles you can only stay afloat for so long.

I'll give you the benefit of the doubt and say that the increased taxes and insurance increase doubled the total outlay for taxes, insurance and mortgage?

|7.1.09 @ 11:02AM|#

Thank God the Ascended One will put an end to crony capitalism in this country.

|7.1.09 @ 11:53AM|#

Thanks for your responses:

Lost_in_Translation- Currently we are helping take care of my elderly grandmother (stupidly redundant) so as soon as she dies, I guess we're free to move.

Jasno- We're a little young to have amassed piles of gold, but we are working on it...

Granite26- We were foolish young new homebuyers that later found out if your escrow amount doesn't cover your future taxes and insurance then you end of up in the negative. Your payments have to increase to pay back and also cover next year's payments. Hence, the double part. Had we known what was coming down the pipe of course we would have been prepared to the best our abilities. I guess the assumption is that homebuyers are geniuses that understand everything about the process and were born covered in gold and fiscally responsible. Again, we will move inland when grandmother kicks the bucket and/or is not partially self-sufficient in the home she has earned and owned for 50 years. That is if we ever get out from being upside-down, which I doubt.


I guess at the end of it I don't understand why lenders will take a short-sell amount (drastically lower) from a new buyer versus valuing the house appropriately for the current owners. But, again, I'm no genius, just a deadbeat.

Tim Cavanaugh|7.1.09 @ 1:18PM|#

I'm sorry, Tim, but you've just crossed the Cranky Old Republican Line.

No, but I have crossed the you-think-you-got-problems-buddy line, and I'd love to get back on the other side of it.

It's never good journalistic practice to trade on your pathetic life story, but: Nearly every hardship I've been reading about in the papers these last two years has happened to me: loss of a well-paying job; massive loss of real estate value; extreme uncertainty about how I can continue to pay my mortage; very sporadic income; useless and crooked loan officer... About the only thing I haven't had to deal with is a big uptick in my monthly payments as a result of a reset (though my monthly payment is quite large anyway), and the only reason that didn't happen is that -- even though I can barely do long division -- I recognized that ARMs and teaser rates (which the aforementioned loan officer tried to fob off on me) were just trouble waiting to happen.

If there's anything Cranky Old Republican in this, it may be an appeal to tradition: There's a reason our Olde Tyme ancestors viewed debt with great caution and considered loan default a matter of shame and sorrow. We're lucky to live in a more debt-friendly world than they did, and I can't find any sympathy for people who don't appreciate what a precious and fragile gift lending at interest really is.

Invisible Finger|7.1.09 @ 1:28PM|#

Well due to the destructive hurricane season our homeowner's insurance tripled. Our taxes did as well, due to the booming real estate market... Well when your mortgage nearly doubles...

What you are describing is essentially a fight between the lender and the insurance company/government about who gets to extract what's left of your money. Your mortgage stayed exactly the same. Don't bitch about the lender because the government and the insurance company raised your rates.

I'm not trying to be unsympathetic, but the lender changed nothing - it was the insurance company and the government that are causing the hardship. Your inadvertent deadbeatedness is caused by the insurance company and the government. Go complain to them.

Invisible Finger|7.1.09 @ 1:38PM|#

Someone who was borderline on being able to pay...

...is a deadbeat waiting to happen.

Those people should have been discouraged from getting mortgages, instead they were encouraged to live on the edge. Screw the lender who took such a risk, and screw the schmuck who wanted to live on the edge.

And I'm sure they'll all bitch and moan about me being unsympathetic, biting the hand that feeds them their bailouts.

Russ 2000|7.1.09 @ 1:43PM|#

I thought deadbeats were people like me who paid their credit card balances in full every month.

Tim Cavanaugh|7.1.09 @ 2:31PM|#

Not really, Russ, but we soitenly ain't valued customers.

|7.1.09 @ 3:20PM|#

Invisible Finger - You are right. We would have NEVER purchased had we known what a year would bring. Our rent was going up because available houses were disappearing left and right. We thought we bought a reasonable, if not cheaper, home but our home will never value at our loan amount, sans anything to do with the taxes and insurance. Oh well. There's no bailout for the borderlines. We just get wiser as our credit score gets worse. So is life.

Jordan|7.1.09 @ 3:50PM|#

Awesome rant, Tim. Don't let the deadbeat trolls get to you.

Misty |7.1.09 @ 4:41PM|#

Lastly (since this topic is on my mind all day for months now) we pay everything we can and will continue to do so until we're tapped out. I would be very shamed if we lost our home. But we do have to feed the kids, eventually.

SIV|7.1.09 @ 5:05PM|#

You deadbeats know they can't make you pay don't you? If I was foolish enough to buy a very expensive depreciating asset for way more than I could afford to pay I'd just say fuck it and walk away.

Kirk Hawley|7.1.09 @ 6:44PM|#

I've been a well-paid programmer for 19 years. My employers sold out to their biggest competitor in September. I've been out of work since then. My mortgage company reduced my payments, which were already low - I own a house that was well within my means. Very nice of them, and it's helped me hold out till now. But I'm still out of work. Sometimes renegotiating just puts off the inevitable when there's no work.

|7.1.09 @ 6:55PM|#

I love how people replying to Misty are saying, in effect, "don't ever take any risks at all". It leaves me wondering whether these people ever get out of bed--after all, you might trip and fall and put your eye out on the corner of the dresser. And forget showering--why, if you slipped and fell and got your head lodged under the faucet and breathed in some water, you would DROWN!

|7.1.09 @ 7:05PM|#

You really do miss the point on this issue.

Have you forgotten how aggressively reputable firms were hawking no money down loans up to 125% of the home's value were? Variable interest loans were all the rage because if at the end of the day you didn't get the promotion or otherwise found the mortgage payment unbearable you could just refinance!

Consolidate your credit card debts with a home equity loan!!

All of which was great until the bubble created by the government and financial industry went pop. Suddenly people were stuck with homes that had negative equity. Suddenly refinancing wasn't an option.

Now, just for fun, throw in the worst economy in two generations. And you are surprised that people are in over their heads?

|7.1.09 @ 7:20PM|#

I love how people replying to Misty are saying, in effect, "don't ever take any risks at all". It leaves me wondering whether these people ever get out of bed--after all, you might trip and fall and put your eye out on the corner of the dresser. And forget showering--why, if you slipped and fell and got your head lodged under the faucet and breathed in some water, you would DROWN!

If only this would happen to me! I have enough life insurance to cover most of the mortgage and it would be one less deadbeat.

|7.1.09 @ 7:21PM|#

What a bunch of whining irresponsible losers. Some one borrowed 90K for school, was he nuts or just stupid. Unless it was med school that was just piss poor planning on your part. Sorry Charlie, no sympathy.
Some of you did not foresee property tax increases in FL before buying a house, MY GOD stupidity in action. Some of you needed two incomes to buy a house and lost one, sorry, no sympathy here.
I MIGHT have sympathy for someone who bought a very modest house based on one income who has lost his job BUT, where was his 6 month cushion?
Look, when you make your life's largest purchase, you have to do your homework. Bad planning and failure to plan for bad contingencies is your problem, not mine. I lost my job once too but had enough sense to have a cushion in the bank till I got another.
PLAN, PLAN, PLan and then Plan some more.

|7.1.09 @ 7:26PM|#

Instead of tearing each other up, which is what the statist scum who run things want us to do, why don't we instead turn our anger on the criminal bastard politicians of BOTH parties who have created this mess? They bankrupted the richest country on earth, blundered us into two no-win wars (and number 3 is on the way) and destroyed a reputation we spent 200 years building. They did this to us. How about we channel that anger, fear and uncertainty and take it out on those THIEVING CORRUPT A**HOLES for a change, instead of lashing out at each other? Focus on our real enemy - everyone in DC, those who protect them, those who support them, those who live off them.

Not Tim\'s Mom|7.1.09 @ 7:32PM|#

Interesting data to point out. Generally, if you talk to lenders, the defaults are not mostly people like Misty. They are people defaulting on two or three loans at the same time because they were real estate speculators. So of course they continue to default.

|7.1.09 @ 7:41PM|#

Those who are the first to enlist to fight for their country say "If not me, who? If not now, when?"

Those who are first to take advantage of the system in which fellow citizens are forced by the robber politicians to give up their wealth to buy votes from their fellow country men say "If not me, who? If not now, when?"

Frank|7.1.09 @ 8:48PM|#

"What a bunch of whining irresponsible losers. Some one borrowed 90K for school, was he nuts or just stupid?"

You think 90k is out of the ordinary? My lawyer friend has over 120k. Teachers in the 70s. Doctors far more. Please. Look around. Student loans will be the next bubble to burst. The fed poured all that fake credit into the education market, and prices skyrocketed beyond the pace of inflation, and lower-middle-class-white-single-parent students--who didn't qualify for race-based or economic grants--had to borrow to get through.

At any rate, Reason can fuck off.

Thomas Jefferson, the classical liberal he was, was also heavily in debt for his education. He bought thousands and thousands of dollars worth of books. He, too, made too many poor housing choices (all that remodeling of Monticello in pursuit of architectural excellence). When he died, all his shit was sold and he couldn't even free his slaves, which he sincerely wanted. Jefferson was a slave to education. And thank god for that.

Reason just shat on his grave.

Fuckers.

SIV|7.1.09 @ 8:52PM|#

At any rate, Reason can fuck off.


I think this calls for a drink.

|7.1.09 @ 9:05PM|#

I'm buying.

|7.1.09 @ 9:06PM|#

Dear Mr. Cavanaugh: You wrote:

"It's never good journalistic practice to trade on your pathetic life story..."

Get with it Mac! No wonder you are having so much trouble. If you worked for a reputable paper like the New York TIMES, instead of this rag that insists its readers and writers think for themselves and take on their own responsibilities, you wouldn't have this problem! You could compose a whiny song, complete with nasty, repetitive lyrics wallowing in utterly conventional obscentiy like Frank and his piddling 90K, secure in the knowledge that The One will bail you out, again and again if necessary, so long as you vote right.

Sincerely yours,
Gregory Koster

Misty|7.1.09 @ 9:06PM|#

Yea. I guess I was too hopeful to think that kinder words might be spoken. I'm very aware of how stupid I am, now. To have the foresight would have been awesome.

Frank|7.2.09 @ 12:19AM|#

And Reason, Peter Schiff calls 'em what they are, in economic terms: defaults.

Again, fuck you and your labeling.

Peter Schiff on the housing market and the record delinquencies in the prime mortgage market:
http://www.youtube.com/watch?v=kYyGLm4Itns

|7.2.09 @ 12:24AM|#

Posters here have NO IDEA the extent of the problem. The truth is, if every foreclosed borrower went to court w/ a decent lawyer who actually knows all the applicable law, the banks would likely end up losing billions in fraud and predatory lending punatives. I personally have worked on about 80 different cases, of which 100% involved some sort of fraud on the part of the lender in order to qualify the loan. And by fraud I mean things like the lender blatantly lied on the 1003 loan application by either having the borrower sign a blank sheet and filling in the information itself, or not showing the borrower (who usually doesn't even know what a 1003 is in the first place) the actual 1003 the lender submitted until the promissory note and deed of trust are signed, 5 pages of paper from a stack of 100s, and the lender pressuring the borrower to sign the documents without reading them. Not to mention that the entire secondary mortgage market is defacto illegal since under the UCC only the physical holder of the note or its agents can demand repayment or foreclose, and pretty much every single promissory note in the secondary market has disappeared into the ether due to the shoddy and illegal transfers of ownership the secondary mortgage market made in the name of "efficiency".

In probably 90% of the cases, the lender will not signficantly reduce the balance. I've worked with WAMU/Chase, IndyMac/OneWest, Countrywide/BoA, and scores of otehr banks, and only Wachovia will go as far as 20% unless you've got a fool proof fraud complaint filed. We're talking about balances that, thanks to the magic of negative amortization, are sometimes $100k+ more than the original loan balance, while the value of the home is actual halved or worse. By that I mean, even though the borrower paid the loan every month, the balance still increased by thousands because of the screwed up loan terms. The truth is, thanks to their shady and yes, illegal method of transfering mortgages on the secondary market, servicers actually make more money foreclosing a house than giving a borrower a good loan mod. On the other hand, most of the loan mod companies out there don't know a damned thing about what they are doing and in some cases I have seen, charge based on the final modified loan balance. In other words, the loan mod company gets paid more when the loan mod balance is higher. Of course the borrowers are going to default when the people they hire to look out for them have financial incentives to screw them on the loan mod.

Redjac|7.2.09 @ 12:34AM|#

I am a consumer bankruptcy lawyer. I help people use the bankruptcy code to modify their home mortgage loans in order to save their houses. Thus I meet distressed home owners on a daily basis.

I would like to make two points:

1) The home mortgage modification system/programs is needlessly complicated. Most people cannot get through it because they lose your application, keep you on hold for hours, make you talk to a new team member every time you call, etc.

2) Some people are just not competent enough to be American Home Owners. They cannot do it. They cannot keep a job or understand compound interest. They cannot file annual tax returns or pay them in a timely manner. They do not understand escrow or the underlying collateral mortgage note they signed. They do not know the difference between hazard insurance and mortgage default insurance.

Some people just cannot pay a house note on time no matter how the mortgage is modified. I do not believe it is because they have "deadbeat mindset", rather they do not have the required skill set to do it.

Before I started my practice, I knew they were people like the above. I just did not know there were so many of them.

Trying to modify mortgages for the people above is like screaming at the rain - futile.

Steven|7.2.09 @ 3:32AM|#

You think 90k is out of the ordinary? My lawyer friend has over 120k. Teachers in the 70s. Doctors far more.

So, in other words, you are saying you know a lot of stupid people.

Just because people can take out a lot of debt for their "education" doesn't mean they should.

|7.2.09 @ 4:42AM|#

What's so difficult? If you borrowed the money, you must have thought whatever you were buying was worth it. If it turns out that it wasn't, it's what is commonly known as "a bad decision" and you still owe the money. What fool takes out an ARM to buy a home where the initial rate is so low that the payment is a fraction of what it is going to be when the mortgage adjusts? What about a credit card with an "introductory zero percent interest rate for six months"? Well, after six months you will be charged interest.

When I went to school, I worked and paid for everything without a loan. It certainly took me longer but, in the end, I had no student loan.

Hell, some morons actually got 2nd mortgages and then bought cars or other toys. Who is stupid enough to finance short term assets with long term debt?

There have been laws in place for years that require lenders to tell borrowers about their cost of borrowing. These documents are signed by the borrower with this information prominently displayed.

Forest Gump's Mother: Stupid is as stupid does.

gregoryguay|7.2.09 @ 7:03AM|#

Mr. President why are the banking,and loan company not making loans as you promised they would do for the american people we are all hurting and not getting any help. Time for them to answer to you for not helping us the little people that keep them in business, maybe we should boycott their business. Check http://obamamortgage2009.blogspot.com/2009/03/obamas-mortgage-modification-do-you.html#comments

|7.2.09 @ 12:58PM|#

Help me out here.
What part of having ANY mortgage makes some folks believe THEY are a home OWNER?

Give me a call when there's ZERO obligations
where any attachable percentage of the home is "collateral" on a debt. THEN we can move on to repercussions of non-payment of property taxes.

|7.2.09 @ 2:10PM|#

I helped out a coworker with a loan mod (a long and arduious process). What did she get? Missed payments rolled back into the loan and the interest rate stayed at the second adjustment of about 7.5%.

Know what? It's still too much to pay every month and I predict a redefault. Between the ongoing financial stress and the neighborhood turning to shit (inland empire) the odds don't look good.

|7.2.09 @ 2:17PM|#

For the deadbeats: In America you have what's known as a non-recourse loan with the house pledged as the primary asset. In other words, walk away and rent (oh, the horror!).

|7.2.09 @ 4:24PM|#

"They're deadbeats, and it's time to stop pretending they can be anything else."

Oh God, just what we need - another class of victims needing special consideration. At least they'll have no difficulty finding sympathetic qualified spokesmen.
.

Michael Ejercito|7.6.09 @ 1:36PM|#

What about a credit card with an "introductory zero percent interest rate for six months"? Well, after six months you will be charged interest.

Only if you do not pay on time.

EscapedWestOfTheBigMuddy|7.6.09 @ 2:16PM|#

Help me out here.
What part of having ANY mortgage makes some folks believe THEY are a home OWNER?

Damn if I know.

The phrase I used (about our ex-residence east of the big river) was "we own it with the bank". Much more real. We never had more than about 25%, and most of that belong to the inlaws who were our silent partners.

I was sad to part with it, though. I liked that house. Hopefully the tenant will get their financing soon, and we can get it off the books. In the mean time, they pay our mortgage, so we can afford to rent a rat trap in our newest home.


I presume that lenders are well advised to make a distinction between willful deadbeats and those who are simple too dumb or ignorant to handle a loan on one hand, and folks who made a reasonable bet and lost on the other.

'Course that would assume that the lenders have the wisdom and discrimination to sort the groups out. Their complicity in the run-up to the recent trouble is not promising on that front, and our Dear Leaders have conspired to keep the screw-ups in charge. Plus ce change.