Now we have to worry about our neighbor’s finances

This article by Liz Pulliam Weston, entitled Foreclosure Nearby?  It’s your problem, brings up the “friendly fire” aspect of foreclosures:  a foreclosure nearby hurts everyone in the neighborhood, not just the personl foreclosed on.

A neighbor who’s in financial trouble probably is worried about their house, but it’s almost certain that they’re not worried about the value of your house going down.  The value of your house will go down in the event of a foreclosure though.

On first reading Weston’s article I laughed at her suggestions, but she’s absolutely right.  No one will care about your finances as much as you will. If this means sticking your nose in their business a little bit, then that’s what has to be done for both your good and their’s.  Here’s what she suggests:

  • Suggest that they get help. If they’re in denial about the foreclosure, then this is crucial.  Nothing good happens until one gets past this point.
  • Enlist your HOA to use the power of numbers as leverage.
  • Be aware of who’s moving in or out and especially be aware of signs that the property is becoming abandoned.
  • Trespass to mow the lawn?! I think this one’s going a bit far.  If there’s a way to get the owner’s permission to do this, though, that might help.
  • Push for legislation to allow judges to lower the amount owed on houses?! This is a can of worms, and opens the door for other abuses.  Lenders can already lower the amount owed on their own accord if they want to, but forcing them to take less for the property through a judgment is the start of a slippery slope.

One I’d add: See if you can buy the property! This isn’t for everyone, but managing a property next door does have its advantages.  Plus, it’s a neighborhood you know well and would like to keep attractive.

HUD tips for avoiding foreclosure: Part 2

The US Department of Housing and Urban Development has some good advice for people that are in danger of losing their home through foreclosure. I talked a little about the first three HUD tips here.  Here are some more tips from that list, with some discussion.

  • Know your mortgage rights. “Find your loan documents and read them so you know what your lender may do if you can’t make your payments.  Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.”  Knowing how much time lenders need to wait, or have to act, helps.
  • Understand foreclosure prevention options. “Valuable information about foreclosure prevention options can be found here.”  Now that lenders stand to lose a lot more through the foreclosure process than they did when house prices were appreciating rapidly, they will be more willing to work with you as long as you continue to make payments.
  • Contact a HUD-approved housing counselor. The government offers free or low-cost housing counseling nationwide, including representation in negotiations with lenders and general financial organization.  Numbers to call are (800) 569-4287 or TTY (800) 877-8339.
  • Prioritize your spending. Keeping your house should be the top priority aside from staying healthy and taking care of medical conditions.  Everything else is in the weeds, especially “nice-to-haves” like extended cable, NetFlix, etc.  Even unsecured debt is lower on the totem pole.  Missing a credit card payment isn’t good of course, but missing a mortgage payment is worse.

I’ll discuss the last three in a few days, but if you want them all, you can go here.

Why get foreclosed on when you can “walk away?”

If you look at the demeanor on the faces of the people over at YouWalkAway.com, you might think that getting foreclosed on is downright enjoyable.  A walk through the park with your spouse and child, as it were.

It even seems a bit empowering.  You don’t get foreclosed on; you walk away.  Kind of like “Take this house and shove it.”

Who wouldn’t be enticed by the prospect of “[living] payment free for up to 8 months or more and [walking] away without owing a penny?”  It’s more like you can be kicked out once things are official (it doesn’t have to be 8 months) and you’ll not owe but no lender will entertain lending you money again for a while at anything close to a good interest rate.  That, and it’s likely that you’ll feel like a failure.  (But that doesn’t quite have the same ring to it.)

The sizzle they’re selling is a brief period of peace of mind and the prospects of a fairly quick recovery.  The steak is hand-holding through a process that can be done for free, with the end result being the same: a foreclosure on the credit record, and a couple hundred points or more off of the credit score for a while.

If foreclosure is the only option, then it’s the only option.  I’m all for paying someone to solve problems, but paying someone almost a thousand bucks to alleviate things temporarily doesn’t really seem like a good deal.  And how people can justify the expense when it’s already clear they can’t afford their housing doesn’t make much sense either.

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 to reinstate your loan and the more likely that you will lose your house,” the site goes on to say. Regardless of what the problem is — health problems, alcoholism, addiction, or financial problems — it’s human nature to be in a state of denial about what’s happening. Realizing that the foreclosure is likely, and then dealing with the issues involved, may get things back on track. The earlier, the better.
  • Contact your lender as soon as you realize that you have a problem. “Lenders do not want your house. They have options to help borrowers through difficult financial times.” With more and more mortgages becoming upside-down — meaning that more is owed on the house than what it would likely sell for — lenders really don’t want your house if there’s the possibility that they’d lose money on it. New legislation, for better or worse, is in process for them to receive funds to help homeowners keep their houses out of foreclosure. Again, the earlier, the better.
  • Open and respond to all mail from your lender. “The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action.”  The news from your lender won’t get any better if you stop paying them.  This gets back to the top tip on the list:  Don’t ignore the problem!  Just because the mail is unopened doesn’t mean that there isn’t a problem.

I’ll do a couple more posts adding to the HUD’s great tips, but if you want more right now, check them all here.

Tent sweet tent?

This BBC video took me by surprise the first time I saw it:

Tent City in LA

I couldn’t imagine trading the security and solidness of real estate for a camper, let alone a tent.  This has got to be a rude awakening for families that have recently lost their homes.  Among the adjustments cited in the clip were cessation of family visits to the new home, and the painful reality of walking by the home that was once owned.

As the economy worsens, as adjustable-rate mortgages reset, as home values fall below the point where people can refinance, and as lending practices tighten, this scene will unfortunately become more common — and not just for people that shouldn’t have been able to buy the houses in the first place.

The market conditions reduce everyone’s margin of safety.  Only the very rich will be immune; middle-class folks that would otherwise thrive and be able to afford their homes are vulnerable to job loss or catastrophic illness.

If you think that this can’t happen to you, well, maybe it won’t, but do what you can to keep your job and to re-position your finances so that a job loss won’t make you delinquent on your mortgage payments.

Stripped for copper

Abandoned houses attract a lot of things: partying teenagers, mice, rocks through the windows, the elements.

Now, with the houses rotting away in varying states in the foreclosure process, these houses are now attracting black-market commodities dealers.  The houses are broken into and stripped of their copper pipes and wires.  Copper has quintupled in price over the past three years, making it worth the risk for thieves.

Needless to say, pulling out plumbing does not improve the chances that a house will be sold.

Parties responsible for the properties are aware of the problem and trying to prevent further reduction in the homes’ values by posting signs like “No Copper Only PVC” on the house.  This reminded me of a walk through New York City one time.  Some cars parked on the side of the road had signs like “No Radio — Thank You” in them.  (“Thanks for breaking into the car next to me.”)

“No Copper.  Thank you!”

The first post on the site

Welcome to the first post on Living After Foreclosure! Here are some of the things I plan to talk about on this site:

  • The foreclosure process — how one gets to that point, what’s involved, how it can be avoided
  • The social effects of foreclosure
  • How widespread foreclosure affects society and the economy
  • How one deals with foreclosure after it’s happened

With each foreclosure there are winners and losers. I hope to present both sides fairly. Foreclosures involve people, so it would be unfair to forget this or dismiss it.

Beyond that, we’ll see where it goes! Thanks for stopping by!