Kudos to the folks sent to do the unpleasant task for not being heartless.  That would have broken my heart, too.

It might set a precedent, or it might not.  Probably not.  It’s a dangerous precedent to set.  There are an awful lot of people behind on their mortgages, and some of them are bound to be very old.  Charity and business are not one and the same thing.  Businesses shouldn’t be prevented from being charitable, but on the other hand they shouldn’t be forced to, either.

Nor should they be shamed into doing so, either.  Business is business.  It’s far too easy to gang up on banks for being heartless.  Shouldn’t adults be held responsible for their actions, lack of planning, whatever?  Shouldn’t older people be wiser as well?

I’m glad Ms. Hall and her daughter can stay in their house for the moment.  Banks shouldn’t be forced to let them, though.

It’s entertaining to see the tables turned on a bank for once.  After a bank wrongfully foreclosed on a homeowner who apparently never even carried a mortgage against the property, a judge ruled in the homeowner’s favor and ordered the bank to pay the homeowners’ legal fees.  When this didn’t happen for months, the homeowners’ attorney took motions to seize the bank’s assets — effectively, foreclosing on them.  Sweet music, no?

Commercial properties — yes, even banks — are not immune to foreclosure.  Many will be foreclosed on in this economic downturn.

Getting to the point of a foreclosure auction doesn’t mean that the property is lost.  There’s usually the right to redeem the property more or less right up to the time of sale.  The owner of the mortgage in default has already taken a hit on their credit for being so late on the payments, but keeping the property out of foreclosure is far better than letting it go into foreclosure.

Granted, not everyone has a princely six-figure wad of cash to throw at a mortgage, but there always is a chance of redemption if your property is going to a foreclosure auction.

In a nutshell, a short sale is a sale of a property for less than what’s owed on it.  It’s meant to end up being less costly to the lender than foreclosure in the case of a default by the borrower.  Short sales, though, involve much more negotiation than foreclosures because legal title hasn’t yet been transferred to the lender.

The only people for which the process is remotely pleasant is the buyers and the real estate agents.  The buyer stands to get the property at below market value (one would hope) and the real estate agents stand to make commissions on the sale.  The lenders are hung out to dry because they’re losing, and the seller will have his credit trashed after the transfer.  But short sales often fall through because the parties cannot agree on the terms of the sale.  That can make it frustrating for prospective buyers.  Contrast this with buying foreclosures, which can move really fast — almost too fast — for the buyer.

Take Debt Kid’s story as a warning.

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.

Folks are buying St. Joseph (husband of Mary) figurines and burying them, upside-down, near the For Sale sign in hopes of bringing a quicker sale.

Prayer sure doesn’t hurt but this is a bit off the deep end.  I had heard about this practice several months ago as a woman in our home group knew someone who did this.  Heck, kits are available for sale just for this purpose!

About the only thing that will help sell a house in this kind of a down market is lowering the price and taking a loss, if needed, or holding out for a recovery.

What may make the foreclosure situation worse is that some communities and homeowners’ associations are clamping down on owners’ rights to rent their properties.  Without the option to rent out, owners are forced to carry the full weight of their mortgage payments until they can sell — or until they’re foreclosed on.  It’s simply HOAs looking after their interests, but it’s at the expense of strapped homeowners.

The 700,000 REO properties is huge.  That will take a while to burn off, and home prices will go down when they hit market.

No one’s immune.  If you’re not being foreclosed on, someone near you probably is, and that affects the value of your house and your neighborhood.

Over the past few years I’ve seen people occasionally posting a place for rent or sale.  Usually not too often.  For the past couple of weeks, I’m greeted each day with four advertisements for property.  Three of them are looking for renters.

It might be just that lots of people have vacancies now, or it could be that the owners are in a pinch, have moved, and need to stop the bleeding because they can’t sell.  One way to stop the bleeding is to rent the house out.

I think there will be more need for rentals as people lose their homes to foreclosure.  They’ll need to live somewhere.  But renters can move.  They can find good deals.  They don’t have to settle for above-market rent just because the owner needs to charge them that to stay afloat themselves.

Workplace MLS is a cheap way to sell real estate.  Maybe it’s all people can afford to do?

• Offer a deed in lieu of foreclosure. This is an option if the shortfall between your house’s value and what’s owed on it isn’t too much.  The lender can say, “Yeah, I’ll take the deed back, and you won’t owe anything.”  It’s similar to solving a disagreement through arbitration instead of going to court: It’s less costly for both parties.
• Negotiate a short sale. If the lender stands to lose a lot of money through a foreclosure, then a short sale may be possible.  The lender agrees to release the mortgage for less than what’s owed, and the deed is transferred to a third party.
• Allow the foreclosure to proceed. There may be no other option, and your credit rating will be absolutely trashed for a while, but sometimes it’s not possible to avoid.  Foreclosure is never the end of the world, though.

Be realistic.  A house is just a house.  It may have a lot of sentimental value but when all is said and done it’s just a structure and a place to hang your hat and store your stuff.  If this structure is costing too much, then getting out while it’s still possible to get out is wise.  I certainly wouldn’t want to pull myself away from my house, but when facing foreclosure being able to walk away with the credit rating intact is certainly a better option.  This might mean forfeiting some equity to sell the house, but in today’s market, selling and living to tell the tale is a win.

Get organized. Especially if you’re approaching your lender for a modification to your loan.  Weston writes:  “The lender will specify what it wants, but typically you’ll need to supply the details of your financial situation, a budget, documentation of your hardship (a letter from your doctor explaining an income-reducing illness, for example, or your layoff notice from your employer) and a ‘hardship letter’ that outlines, in heart-rending detail, the circumstances that led you to fall behind and the improved prospects that will allow you to get your financial life back on track.”  Even if this isn’t the case, organization helps, because maintaining the paperwork from the lender is useful for whatever negotiations you want to attempt. 

Sell the house. If you have enough equity in your home to pay off your mortgage and pay the real estate agent’s commission, this is the best outcome if you’ve reached the conclusion that you can’t afford the house anyway.  The bad marks on your record stop and the problem (your house) is gone.  If you’re actually in a position of positive equity, your lender will be less likely to make a deal with you anyway since their loss is probably covered.