Living After Foreclosure

Few states have been hit harder by the foreclosure mess than Florida.  Properties in some areas are worth half of what they were at their peak.  A sizable number of underwater borrowers — those owing more than their homes are currently worth — have simply stopped making payments on their mortgages, using the extra money to pay off other debts, and then forcing the lenders to take the property back through foreclosure proceedings.

It sticks a loss to the bank, of course, but banks aren’t taking this lying down.  Faced with over half a million borrowers (an estimate by Experian) banks are playing tougher:

• They recognize the likely patterns and encourage the at-risk-of-defaulting homeowners to tough it out.  This keeps the payments coming in.
• They go after defaulted borrowers with other legal avenues such as deficiency judgments to collect the difference between the sale price (after the foreclosure) and the amount owed.

Just because the foreclosure process is becoming more socially acceptable doesn’t mean that (a) there aren’t consequences, and (b) it’s not ethically wrong.  A house is a place to live first and foremost — not an investment first and foremost.  Cutting bait on paper losses is shortsighted, because the house still provides shelter.  It just hasn’t produced the double-digit gains investors were expecting.  Oh well.

• Conseco was foreclosed on There will be more celebrities losing their homes. I'm sure of it. Jose Conseco lost his 7,300 square-foot home yesterday, owing about $2.5 million on it. The home currently on his plate is smaller. It's all a matter of cash flow: trying to support more house than you can easily......
• Albany's "foreclosure intervention" bill confuses me There's legislation ongoing in Albany, NY, that will allow judges to postpone foreclosure proceeding and modify interest rates on mortgage notes of subprime borrowers. The Wall Street Journal contends in an editorial that this is "pols ... taking a whack at bank balance sheets" by giving judges the authority to......
• HUD tips for avoiding foreclosure: Part 1 The US Department of Housing and Urban Development has some good advice for people that are in danger of losing their home through foreclosure. Here are a couple of items from that list, with some discussion. Don't ignore the problem. "The further behind you become, the harder it will be......
• You may already have won a foreclosure! Who would've thought it? Ed McMahon is in default on his Beverly Hills home. Star searches these days reveal rich-and-famous folks getting behind on their payments. I've watched lots of shows with Mr. McMahon, including TV's Bloopers and Practical Jokes, Star Search, and of course The Tonight Show and it......

• Do Not Buy A House Before You Are Ready And Able. The following is a guest post from Trees Full of Money. Don't buy into the hype that if you are renting you are "throwing money away". When making a decision to buy a new property, make sure that you are truly ready. With the run up in home prices over......
• No Doubt About It: A Double Dip in Housing is Certain When one of the few banking analysts who correctly predicted the financial crisis (aka debt crisis) and the subsequent popping of the real estate bubble takes the time to speak, you should make the time investment to listen. Based upon weak economic fundamentals across the board, Meredith Whitney is still......
• Monopoly Game Expansion #2: Personal Checking Account Expansions Difficulty/Complexity: Easy This is a cash-free version of the game wherein all transactions are handled through personal checking accounts and recorded in individual check registers. Each player is responsible for his own account and must record all transactions – payment and receipt of rent, taxes, bribes, etc. in......
• Time to sell your house and rent? This is probably unusual advice.  Maybe even bad advice.  Seems silly to get out of home ownership into renting.  The American Dream is just the opposite:  getting out of renting into home ownership.Renting has a lot of disadvantages compared to home ownership, and under most circumstances it's better in the......