Desperate Home “Owners” Overwhelm Local Counselors

Wait a minute… I thought only California had lots of people that took out dangerous loans, and are now at risk of foreclosure.

Counselors overwhelmed with calls from desperate homeowners

Housing advocates and lending counselors say they’re being overwhelmed with calls for help from desperate Seattle-area homeowners, many on the brink of foreclosure.

As interest rates reset, thousands of Seattle-area homeowners are facing skyrocketing mortgage payments – payments many people just can’t afford.

Hmm…

(Linda Byron, KING 5 News, 08.28.2008)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

37 comments:

  1. 1
    The Tim says:

    Sorry, this short post is all you get today, because I’m heading out to PAX. If any of you other gaming nerds are there, you can find me in a reporter getup (fedora and all) with a very official-looking press pass from The Naked Loon. Seriously.

  2. 2
    vboring says:

    sarcasm /*

    the calls must be from Californians pretending to be Washingtonians because all of the California foreclosure resources are swamped */

  3. 3
    3rd Generation says:

    But wait, I thought Seattle was SPECIAL?….

    Bwa ha ha ha ha

  4. 4

    TOUGH LOVE

    Its also time to get this debt crisis controlled ASAP to prevent another Great Depression run on the banks.

    Giving the subprime mess organised crime banks “bailout” welfare may delay the inevitable; but in the end, in my opinion, the foreclosures will go forth anyway and the delay “just makes it worse” as today’s bad loans get added into the next wave, then the next wave, etc…

    Let’s not be codependent with America’s organised crime bankers, let free enterprise clean up the mess in its own time and much quicker than too, rather than making the debt crisis get worse to temporarily get better, only to get far worse than would if we left it alone.

    I suggest tough love.

  5. 5
    pragmatic says:

    Tim, were you the guy with the Fedora at the April JoCo concert?

  6. 6
    Buceri says:

    As interest rates reset, thousands of Seattle-area homeowners are facing skyrocketing mortgage payments – payments many people just can’t afford.

    These are the thousands of people that were told “this is the best time to buy”. These are the people “experts” are happy they did not pay attention to the national media and did not stay on the “sidelines”.

    It’s truly a crime.

  7. 7

    Hold on. I call B.S. The housing counseling agency interviewed says they’re getting 50 calls per week.

    Considering a 8 hour day, spending an hour on the phone with each person, they’d need only 3 people working full time to handle these calls…..unless they’re on the phone for way longer than 1 hour. Even double the time spent on the phone and I fail to see how the agency could be “overwhelmed.”

    Governor Gregoire just gave the housing counseling agencies 1.5 million of our tax dollars from the rainy day fund a few months ago.

    I’d like an accounting as to how that money is being spent.

    KING 5TV, can you get on this story, please? We bloggers have other full time jobs. Thank you.

    I’d like a reporter to interview someone from EACH of the housing counseling agencies.

    I fully expect to see all agencies rise to the occasion of being able to handle the onslaught of all the EXPECTED PHONE CALLS.

    The governor’s 2007 task force report concluded that there WOULD be an increase in calls…..and we gave the agencies resources to handle it.

    Now give US a report on how that worked.

    If the agencies can’t “handle” it, then there sure are several hundred thousand starving loan originators who are going to swoop in and collect up front fees from these homeowners with promises of getting loan mods.

  8. 8
    Sniglet says:

    I don’t think the interest rate resets will impact foreclosure rates all that much. The real issue is the amount of equity people have in their homes. So long as you have plenty of equity a big reset is no big deal: you can just refinance or sell. It all comes down to equity in the end.

    Thus, the real question we need to look at is this: what percentage of Puget Sound home-owners have little or no equity? It would be particularly interesting to see how this has trended over time (i.e. is there a lower percentage of Puget Sound home-owners with no equity today than in the ’80s?).

  9. 9
    biliruben says:

    The national numbers suggest that there are a higher percentage of homeowners with no equity than at any other time in history. I dunno about the local numbers, that it would be great to see them.

  10. 10
    John says:

    Had a nice meal at El Gaucho a couple nights ago. The valets were a little backed up so I was waiting for about 10 minutes for my car to arrive. Bored, I was listening to one of the other customers talk to what I guessed was the valet manager sitting at the valet booth. The customer was explaining to the valet the details of his loan and how he was facing foreclosure due to the increasing resets. The valet was explaining to him how to renegotiate with the bank on terms because “the banks are broke and will do anything to keep you”.

    One year ago when I was in line at Safeway I was disgusted listening to a checkout girl talk to a customer about how she got a 450K no-doc loan. Now I am not sure, but I may be even more disgusted at customers at El Gaucho talking about their impending foreclosure after eating a >$200 meal.

    Basically though…I am disgusted.

  11. 11
    Dudly Doright says:

    My neighbor just defaulted on a loan for 600,000 ponies. She was trying to sell the house for well over a year. The area is historically solid with some wonderful views. My neighbor said this is the first foreclosure that he has ever seen in his almost 50 years in the neighborhood. And for all you physics trying to figure out where this paradise is; northwest Ballard.

  12. 12
    pragmatic says:

    @8 Sniglet, go here Seattle Area Equity Map

  13. 13
    Sniglet says:

    Interesting… The equity map pragmatic posted seems to indicate that the areas seeing the fastest price declines have the highest number of home-owners with negative equity. That would certainly make sense, since dropping prices erase what equity people have.

    It would be interesting to see just how many home-owners have 5% or less equity. Although places like Bellevue and Redmond seem to show a relatively small number of equity poor home-owners, I wonder how many are on the brink (i.e. will wind up with negative equity with a further 5% or 10% price decline)?

  14. 14
    Bits_of_Real_Panther says:

    “As interest rates reset, thousands of Seattle-area homeowners are facing skyrocketing mortgage payments”

    I don’t get this – when my rate adjusts next year it is likely to result in an unchanged payment if not lower at 1 year LIBOR +2

    What kind of loans did these choads get themselves into?

  15. 15
    Sniglet says:

    By the way, I am surprised that Whidbey Island is shown as having less than 6% of home-buyers in negative equity positions. The Island County have been seeing the largest price declines of anywhere in the Puget Sound. With the 20% drops in median prices being recorded there I would have thought it would have wiped out the equity of most buyers during the last 5 years.

    Or maybe buyers in the Island County typically put 30% or 40% down.

  16. 16
    Sniglet says:

    What kind of loans did these choads get themselves into?

    The people who are typically facing calamity due to resets usually have mortgages which allowed them to make VERY low payments for a while before full amortization kicked in. For example, if the going 30 year fixed rate was 6%, you could get a loan that allowed you to only make payments based on 3% for 2 years after which time the interest rate you needed to pay would rise to 8% (to help makeup for the money you weren’t paying during the first 2 years of low payments).

    These loans are great for people who can’t really afford payments for the full interest rate. It allows them to get into a home for a low price, and pray that the prices appreciate significantly during the early low rate period, which would allow them to refinance into a better conventional mortgage or sell and make a bundle before the payments reset.

  17. 17
    Demersus says:

    Many of these buyers got in with really low teaser interest rates, some as low as 1.5 to 2.0% for the first 2 or 3 years. Now it’s going up to about 6 – 7%. That’s can essentially double a mortgage payments.

  18. 18
    explorer says:

    I noted that Zillow equity map was dated Feb. 2008. I bet it’s much different now. Maybe extrapolate since Feb. how much the prices have gone down?

  19. 19
    Al in the boonies says:

    I love reading about distressed elderly people…It makes me feel better about living in my crappy apartment…

    It’s been a terrible year for 84-year-old Everlena Joplin. In January, her great-grandson was killed in a gang-related shooting. Now she fears she could lose her Central District home.

  20. 20
    deejayoh says:

    Tim –

    I’m with Jillayne @ #7.

    I think you misplaced the quotes in your title. It should have read:

    Desperate Homeowners ”Overwhelm” Local Counselors

    Fifty calls per week? Call the national guard. Bit of shoddy reporting on the part of KING 5, if you ask me.

  21. 21

    Sniglet asks, “It would be interesting to see just how many home-owners have 5% or less equity.”

    This should be pretty easy rather soon.

    All we’ll have to do watch the rise in min down (3.5%) FHA loans that are originated from 2008 forward. As home prices continue to flatten out and go down in WA State more of those FHA homebuyers will be underwater

  22. 22
    cheapseats says:

    ”Zillow equity map was dated Feb. 2008″ I think that reads q2 08…

  23. 23
    Mike2 says:

    Al in the boonies // Aug 29, 2008 at 2:20 pm

    I love reading about distressed elderly people…It makes me feel better about living in my crappy apartment…

    It’s been a terrible year for 84-year-old Everlena Joplin. In January, her great-grandson was killed in a gang-related shooting. Now she fears she could lose her Central District home.

    Al, the retirees are among the most screwed during this economic cycle. Low interest rates, rising food and energy costs, rising (low end) rents and falling property values. The only area where they aren’t feeling the pinch is in income growth – only because they don’t work.

    Great society we’ve fostered here.

  24. 24

    “If the agencies can’t “handle” it, then there sure are several hundred thousand starving loan originators who are going to swoop in and collect up front fees from these homeowners with promises of getting loan mods.’

    Please give to the starving loan originator’s fund. In the not too distant past, they could loan themselves money and were living the good life, driving around in Ferraris. Now, they can’t even borrow a cup of sugar from their neighbor, because their neighbor’s house has been foreclosed on. You too can help the starving loan originators.

  25. 25
    TJ_98370 says:

    Al, the retirees are among the most screwed during this economic cycle. Low interest rates, rising food and energy costs, rising (low end) rents and falling property values. The only area where they aren’t feeling the pinch is in income growth – only because they don’t work.
    .
    Great society we’ve fostered here.

    .
    Thank you Mike2. You were ALOT more polite with your response than I could have been.
    .

  26. 26
    The Tim says:

    pragmatic @ 5,

    Nope, wasn’t at his April show. Last one I went to (besides tonight and last year’s PAX) was in November I think, at Triple Door.

  27. 27
    SeattleMoose says:

    People who were stupid enough to think they could really afford a home more than 3x their annual gross deserve what is coming to them.

    Yes, scumbag RE industry “professionals” may have lured some in and lied to “make the sale”, but nobody had a gun to the buyer’s heads as they signed on the dotted line while dreaming of SS appliances and granite countertops.

    A lot of people who thought could afford the lifestyle of someone making 200K will soon realize that they….cannot.

  28. 28
    Denny Retrograde says:

    Ira, that is priceless.

  29. 29
    3rd Generation says:

    6% ers and those associated with 6% ers are doomed.

    Why not learn a skill and earn an honest living for a change?

  30. 30
    John says:

    Can someone teach me how to get foreclosed and still can afford to eat at El Gaucho?

  31. 31
    old timer says:

    @ 12 – Pragmatic
    Does that equity map include second mortgages and HELOCS?
    Lots of folks in their homes for a long time couldn’t resist that ‘equity’ and went for the trips, and cars, and furniture, and of course, kids’ college.
    Now that they’re ‘loaned up’, how much equity cushion is left?

  32. 32
    ekim says:

    Al in the boonies // Aug 29, 2008 at 2:20 pm

    I love reading about distressed elderly people…It makes me feel better about living in my crappy apartment…

    It’s been a terrible year for 84-year-old Everlena Joplin. In January, her great-grandson was killed in a gang-related shooting. Now she fears she could lose her Central District home.

    AL YOU ARE A JERK.

  33. 33
    jonness says:

    “Can someone teach me how to get foreclosed and still can afford to eat at El Gaucho?”

    Easy. Just follow this simple 12-step program:

    Step 1: Buy house for 2x what it cost a few years ago.
    Step 2: Go to gas station and fill up your hummer.
    Step 3: Tell friends how cheap your ARM loan is and convince them to get rid of their expensive fixed rates.
    Step 4: After one year, draw out all your appreciation equity. Brag to friends about how rich you are.
    Step 5: Hear from from bank your home equity line of credit is cut off due to house price depreciation.
    Step 6: Lose job.
    Step 7: To lift depression, charge the last $250 remaining on credit card for expensive meal at El Gaucho. (Important: don’t leave a tip. You’ll need this money for gas to get home.)
    Step 8: In an act of sheer desperation, ask El Gaucho valet manager for help putting your life back together.
    Step 9: Go to gas station, put the last $15 remaining on your credit card in hummer gas tank. (Important: Drive back roads so auto repo-man doesn’t spot you. Park in locked garage when you get home.)
    Step 10: After bank fails to renegotiate, take valet manager’s 2nd piece of advice and apply for food stamps.
    Step 11: Hide when friends knock on door in an attempt to figure out where you’ve been the last few months. (Important: Don’t return answering machine messages.)
    Step 12: Get George Bush tax refund for $600.00. Fill up hummer. Go to friends house and brag about how good you’re doing. (Important: Park hummer in friend’s garage in case auto repo-man is following you.)

  34. 34
    singliac says:

    That was hilarious, jonness!

  35. 35
    singliac says:

    btw John, nice way to show off how wealthy you are. We’re all very impressed.

  36. 36
    ekim says:

    A lot of meanness here.

  37. 37

    […] it’s because KING 5 did basically this exact same story less than two months ago. Housing advocates and lending counselors say they’re being overwhelmed with calls for help […]

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