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Seattle Times Q&A on Foreclosures

The_TimThe_Tim
edited May 2009 in Seattle Real Estate
The Seattle Times is having an online Q&A starting at noon today on the subject of foreclosures. Follow along and/or submit a question here.
Seattle Times wrote:
Questions about foreclosures?

Do you have questions about the foreclosure process, home-rescue scams and what to do if you are an owner or tenant in a house that the bank is going to auction? Experts will answer your questions live at noon on Tuesday, April 28.

Melissa Huelsman is a Seattle attorney who represents homeowners in predatory lending, mortgage servicing and foreclosure-rescue scam litigation. Linda Taylor, director of housing at the Urban League of Metropolitan Seattle and the agency's certified foreclosure prevention counselors.
Here's the question I submitted, which I doubt their pair of "experts" will answer:
Shouldn't foreclosure be allowed to happen for people who bought more house than they could afford on a reasonable loan product, and for people who treated their house as an ATM during the boom years, extracting tens and even hundreds of thousands in equity with numerous cash-out refinances?

The majority of foreclosures I have seen recently seen to fall into those two categories. I understand the desire to promote "foreclosure prevention" for people with legitimately unforeseeable hardship, but why should we "rescue" people that simply made poor financial decisions?

Comments

  • jillaynejillayne
    Wow, there are already at least three wrong answers posted there. The question askers are asking the attorney questions that she doesn't know the answer to and there's another person answering the questions from a non-profit that clearly the attorney should be answering!

    I bet they were hoping for questions from homeowners facing foreclosure and NOT questions relating to bank-owned REOs or buying homes at the trustee sale or loan mods.

    Interesting.
  • The_TimThe_Tim
    Speaking of foreclosures, when are we going to get to read a report of the courthouse auction you went to last week? Did you end up taking video?
  • jillaynejillayne
    Hi Tim,

    I just sent the attorney a tough legal question. Let's see if she decides to post it.

    Regarding last week's auction, yes I had a great time, filmed a few of the trustee sales, met some people from NW Trustee Services, met three local investor group leaders and was invited to attend all three of their "informational meetings.'' However, the meetings are on Tuesday nights and I'm right in the middle of spring soccer season so no can do for now.

    I did get confirmation that yes indeed, banks ARE discounting their own foreclosures and the opening bid on some of the homes is LESS THAN the amount owed. I think this is pretty big news but it's not getting much press. I sent the story idea to Aubrey last week.

    I met a frequent SB commenter who shall remain nameless and who immediately came right up to me when I arrived and introduced himself. I have the video on my camera. Now I just need to download and edit it. For now, that project will have to remain on the back burner due to other immediate projects.

    I'm going to use the film footage for a new class I'm writing.

    If anyone wants to volunteer to help me edit it so we can get it up on youtube sooner, I'd be grateful for the help.
  • The_TimThe_Tim
    Well they took your question, but mine (submitted just before noon) has not shown up, so I guess it won't (as expected).

    Meanwhile, the question "are there many scam artists still?" gets posted. Gotta love the Times.
  • jillaynejillayne
    The answers are getting better now and the attorney has corrected the HUD counselor's answers a few times.
  • Everett_TomEverett_Tom
    Go back again, they did answer your question..

    Melissa Huelsman
    Tue, Apr 28, 2009 1:10 PM
    Ok so you're asking for my opinion and that's what I'm going to give you, and there is no one answer because there are multiple issues involved and implications for the community as a whole.

    Vast numbers of foreclosures are bad for everyone because it lowers property values, allows lots of home to sit vacant and further depreciate values in the neighborhood. There are also very significant tax consequences for communities where homes are sitting vacant. And having more people being homeless is never a good thing for any community. So, those are some of the larger societal issues.

    But your question is also premised on a fundamental misunderstanding of what caused the crisis which are you getting from listening to snippets of the media coverage and from the fact that most of the reporting is not substantive.

    The fact is that most of the people who come to see me did NOT use their homes as ATMs or if they did, they did so because they had huge medical bills or some other family emergency. Or they were convinced by a broker to pay all of their other debts with their homes so they could get the tax write off, and they believed the brokers because they thought they were bankers and knew better than my clients.

    I don't have time to go into the how Wall Street and the lenders created this mess here, but the question of who caused it is much much more complex than blaming it on your neighbors for being irresponsible. Otherwise, you would have to believe that a bunch of Ivy League MBAs were fooled and deceived by your neighbors and that's simply not plausible.

    Wall Street and the lenders and their facilitators at regulator agencies created a system where they wanted loans and they didn't care how they got them, and now all of us are paying the price for their greed (and they do still have all of their individual fortunes). Your neighbors were simply the pawns in the game and they are the ones who are losing everything.
  • Civil ServantCivil Servant
    Wow, Tim, sorry to hear about your "fundamental misunderstanding of what caused the crisis" and your susceptibility to non-substantive reporting. That must be tough.
  • david_mcmanusdavid_mcmanus
    People didn't use their homes as ATMs? Wow, just......wow!

    April 28, 2009 at 12:19 PM
    Rating: (1) (0)
    I am a real estate professional and bought a house for 700K that is now only worth around 400K (and falling). I purchased with an ARM that will not reset for another 3 years. Should I just walk away and not have to pay this? Can the bank do anything with the assets inside the house (tvs, stereo equipment, paintings, etc.) since this was all purchased through home equity?

    Melissa Huelsman
    Tue, Apr 28, 2009 1:13 PM
    I suggest you contact your lender and see if you can negotiate something on your own. You could also seek assistance from a non-profit housing counselor and/or a bankruptcy attorney. Generally, the lender cannot go after your personal assets except if it initiates a lawsuit.
  • jillaynejillayne
    If you google the attorney's name, you will see that she is a strong consumer advocate who sees clients that were victimized so it does not surprise me to see her blame Wall Street and lax regulations and victimize the poor homeowners because that's her world.

    Even Dr. Shiller agrees with a part of her answer in that mass foreclosures are bad for communities.

    Where her answer fails is seeing that falling home values actually helps rebuild communities by bringing home values back down to affordable levels. It's the bright side of the foreclosure mess.
  • Everett_TomEverett_Tom
    david_mcmanus wrote:
    People didn't use their homes as ATMs? Wow, just......wow!

    See, I though the key to her quote was in bold below
    The fact is that most of the people who come to see me did NOT use their homes as ATMs
  • The_TimThe_Tim
    Ah, I see that they did finally post my question. Although it was directed more at the "foreclosure prevention counselor," at least they posted it.

    I'll post a brief response to Melissa Huelsman's answer here, since the format over at the Times page isn't interactive.
    Melissa Huelsman wrote:
    Vast numbers of foreclosures are bad for everyone because it lowers property values, allows lots of home to sit vacant and further depreciate values in the neighborhood.
    You say "lower property values," I say "more affordable housing."
    Melissa Huelsman wrote:
    And having more people being homeless is never a good thing for any community.
    What's with the assumption that people who go through foreclosure suddenly end up homeless? Many of these people are struggling because they are unable to afford their mortgages, when the rent on a comparable house would in fact be far less expensive.
    Melissa Huelsman wrote:
    But your question is also premised on a fundamental misunderstanding of what caused the crisis which are you getting from listening to snippets of the media coverage and from the fact that most of the reporting is not substantive.
    That's an amusing and incredibly false assumption on her part.
    Melissa Huelsman wrote:
    The fact is that most of the people who come to see me did NOT use their homes as ATMs or if they did, they did so because they had huge medical bills or some other family emergency.
    I didn't realize we were only discussing the small subset of people going through foreclosure who have come to Melissa Huelsman.
    Melissa Huelsman wrote:
    I don't have time to go into the how Wall Street and the lenders created this mess here, but the question of who caused it is much much more complex than blaming it on your neighbors for being irresponsible.
    Note that nowhere in my question did I say that the home loan owners who are going through foreclosure were the only party to blame. However, it is their signature on the documents, and if they cannot meet the financial obligations they agreed to, why should they get to keep the house?

    On the flip side, parties on Wall Street and in the banking industry responsible for knowingly committing fraud on their end of the table should be prosecuted to the fullest extent of the law. But that wasn't the subject of the Q&A now, was it?
  • Civil ServantCivil Servant
    Inicidentally, did anyone else think that the "I am a real estate professional..." question (quoted above by David McManus) was a prank? Something is a little whiffy about that one.
  • Everett_TomEverett_Tom
    Civil Servant wrote:
    Inicidentally, did anyone else think that the "I am a real estate professional..." question (quoted above by David McManus) was a prank? Something is a little whiffy about that one.

    I think your right, if you click on his name, you get his previous post.

    Apparently, besides being an agent he does software.
    Check out the latest Ubuntu version, 9.04, just released today. I'll never go back to using MSFT products and my enterprise clients won't either!

    And if that isn't convincing enought, how about this one about RE?
    Another cream puff article by the Times on how the Seattle RE market is special. Who pays you guys to write these articles? Maybe the NAR?
  • david_mcmanusdavid_mcmanus
    Maybe a husband / wife that share an account or stay logged on all the time with one computer? Then again, I find it doubtful that the husband and wife have opinions that differ THAT much.
  • rose-colored-coolaidrose-colored-coolaid
    Melissa Huelsman
    The fact is that most of the people who come to see me did NOT use their homes as ATMs or if they did, they did so because they had huge medical bills or some other family emergency.

    HA! I can count the people I know under age 70 who didn't use their house as an ATM on one hand. Maybe they are just warming up for some real experts later in the week???
  • Civil ServantCivil Servant
    Of the people who did not use their houses as ATMs, I think many used them -- or, more precisely, the assumption that their value would appreciate rapidly -- for something else: an excuse to live larger than their circumstances and paychecks should have dictated. Lavish weddings and vacations, sushi every night, boats, the new car, remodels with restaurant kitchens, etc. Because why be frugal when you already have an ever-fattening cash cow that you don't even have to feed? In this sense the houses are used not so much as ATMs as savings accounts.

    I think that at least locally, in terms of both depth and long-term repercussions the economic impact of the housing slide will exceed expectations. A lot of people who will never need credit counseling or the services of Melissa Huelsman are going to pull back hard on the last few years of consumption, wanting to make up for lost time. A few years ago on a "Daily Show" appearance Fareed Zakaria referred somewhat dismissively to the US as a "massage-based economy." I suspect that more than a few LMTs around here are already not living the good life they had grown used to.
  • The_TimThe_Tim
    Civil Servant wrote:
    Of the people who did not use their houses as ATMs, I think many used them -- or, more precisely, the assumption that their value would appreciate rapidly -- for something else: an excuse to live larger than their circumstances and paychecks should have dictated. Lavish weddings and vacations, sushi every night, boats, the new car, remodels with restaurant kitchens, etc. Because why be frugal when you already have an ever-fattening cash cow that you don't even have to feed? In this sense the houses are used not so much as ATMs as savings accounts.
    As recently as just a few weeks ago I was still hearing ads on the radio for Kiel Mortgage that contained the phrase (I'm going from memory here) "your home is the foundation of your wealth."

    A home is a place to live. It's not a got-dang savings account. I think until we purge that nonsense mindset, we still run the risk of another housing bubble. The good news is that I think we're getting close to the breaking point where people finally stop thinking of houses as some sort of guaranteed investment.
  • perfectfireperfectfire
    The fact is that most of the people who come to see me did NOT use their homes as ATMs or if they did, they did so because they had huge medical bills or some other family emergency.
    Sampling bias.
  • ira sira s
    A home is a place to live. It's not a got-dang savings account. I think until we purge that nonsense mindset, we still run the risk of another housing bubble. The good news is that I think we're getting close to the breaking point where people finally stop thinking of houses as some sort of guaranteed investment.

    I wish that were so. I still get emails from potential clients naming a few neighborhoods with the question to the effect of "Which is going to appreciate the most in value?"
    I try to be honest but diplomatic. I might suggest that some neighborhoods are less likely to depreciate as much as some others, and although there are a few screaming deals out there, there are better venues for investment right now than houses. But if you like the house, like the neighborhood, can afford the payments and are comfortable buying a home in market where home prices are continuing to fall, and you envision yourself living there happily for a long time, then feel free to proceed.
  • Civil ServantCivil Servant
    We would like to swing a 15-year mortgage -- or at least to buy something modest and commit to paying down the interest as fast as we can. When I tell this to people they look at me like I'm crazy. Even when I sketch out how much less one pays in interest over the life of a shorter mortgage, people act like it's nuts to pay more per month than you "have to." (Though I have noticed that it's no longer heretical to express intention to buy less than you "can" afford. Progress!) It's as if the middle part of "homeownership" has lost its meaning in the common usage and there's no such thing as a non-liquid investment -- so I think this goes back to the savings-account concept too. I will believe we're at the breaking point Tim mentions when those people start understanding that I am not, in fact, a fool.
  • ira sira s
    When I tell this to people they look at me like I'm crazy

    You are so NOT crazy! Not having debt is freedom. Having large long term debt is slavery. Paying off a mortgage has to have been one of the best feelings I've ever had, very liberating.
    Being able to pay off a mortgage early or having a 15 yr mortgage gives one a lot more flexibility, and allows one to be able live a little more the way one wants to, not as a slave to "the man".
  • tomtomtomtom
    The Tim wrote:
    Melissa Huelsman wrote:
    The fact is that most of the people who come to see me did NOT use their homes as ATMs or if they did, they did so because they had huge medical bills or some other family emergency.
    I didn't realize we were only discussing the small subset of people going through foreclosure who have come to Melissa Huelsman.
    Apparently she's not working with Real Estate Professionals ( :roll: ). I've been researching an REO property owned by a REP ( :roll: ). Purchased for $510k, recently foreclosed upon for over $1 million in unpaid principal.

    Described as a fixer-upper ... .

    Of course, this wasn't her only foreclosure.
  • AngieAngie
    RCC says:
    HA! I can count the people I know under age 70 who didn't use their house as an ATM on one hand.

    Well, now you know another one.

    CS says:
    We would like to swing a 15-year mortgage -- or at least to buy something modest and commit to paying down the interest as fast as we can. When I tell this to people they look at me like I'm crazy.

    I'm right there with you, sister. Scoot over on that crazy bench.

    Our rental house is 6 years into a 15 year mortgage...Two years into that loan the amount of principal began to exceed the amount of interest and now every month does serious damage to the remaining balance. It is awesome.

    Our current residence is on a 30 year note and in comparison it feels quite excruciatingly slow. However, because it was a fixer and it's a whole lot nicer now, we will be able to get rent well in excess of PITI when it's time to move on to house #3 and turn this one into a rental.

    Mortgage interest sucks, but it doesn't suck quite so badly when someone is paying it on your behalf.

    Ira says:
    there are better venues for investment right now than houses.

    Care to be more specific? I guess those CDs paying 2% are technically in the black...
  • EconEEconE
    rose-colored-coolaid wrote:
    HA! I can count the people I know under age 70 who didn't use their house as an ATM on one hand. Maybe they are just warming up for some real experts later in the week???

    Never cashed out on my house either. I refi'd to a lower rate but kicked myself afterwards knowing I'd be selling. Built plenty of sweat equity however. As SCrow and Angie testify, sweat equity...although it pays "low wages"...it reaps intangible benefits. You get "value" when you make your home a nicer environment to live.

    I will admit however...I'm seeing some serious ATMing here in Los Angeles that tells me that we're still in the early innings and that we will be once again hearing stuff like

    "Nobody could ever envision (Insert upcoming possible catastrophe here) to being that bad or widespread"
    Ira wrote:
    there are better venues for investment right now than houses.
    Angie wrote:
    Care to be more specific? I guess those CDs paying 2% are technically in the black...

    Well...I'm a bit of a thrill seeker. Don't even have any CD's. I only dabble in one or two positions (equities) at any given time. I'm thinking that Pharma's gonna have a run with outpatient oncology drugs so I put my money where my mouth is. I lost my Mother to cancer so perhaps it was a bit personal...and who knows...maybe they'll find a cure. One can only hope.

    Disclaimer...

    Just my crazy opinion, it is not meant to be investment advice, I'm not selling anything to you, don't want to buy anything from you, do your own due diligence...and if you take investment advice from a crazy loon on the internet you're a damn fool.

    Am I covered?
  • ira sira s
    Ira wrote:
    there are better venues for investment right now than houses.
    Angie wrote:
    Care to be more specific? I guess those CDs paying 2% are technically in the black...

    Large, boring, dividend paying stocks of companies that produce inexpensive, non luxury items that people are going to buy no matter how the economy is doing..
    Proctor and Gamble? Johnson and Johnson?
  • WestSideBillyWestSideBilly
    ira s wrote:
    Large, boring, dividend paying stocks of companies that produce inexpensive, non luxury items that people are going to buy no matter how the economy is doing..
    Proctor and Gamble? Johnson and Johnson?

    P&G only lost 1/3 of its share price in the last year, so I guess it's a winner. :mrgreen:
  • ira sira s
    P&G only lost 1/3 of its share price in the last year, so I guess it's a winner.

    Almost all stocks went down last year, and many stocks saw declining earnings. P&G has earnings that are growing, albeit slowly, and appears to be a good value right now.
  • tomtomtomtom
    ira s wrote:
    P&G only lost 1/3 of its share price in the last year, so I guess it's a winner.

    Almost all stocks went down last year, and many stocks saw declining earnings. P&G has earnings that are growing, albeit slowly, and appears to be a good value right now.

    You can always tell the Real Estate Professional ( :roll: ) in the crowd.

    P&G profit falls on drop in sales

    The company, which also makes Gillette razors, Tide and Pampers, said sales dropped to $18.4 billion, down 8 percent from $20.5 billion in the year-ago third quarter. Analysts surveyed by Thomson Financial projected sales of $18.9 billion in the quarter ended in March. Overall profit declined to $2.6 billion from $2.7 billion.

    http://stlouis.bizjournals.com/stlouis/ ... ?ana=yfcpc
  • ira sira s
    You can always tell the Real Estate Professional in the crowd.

    You just can't tell them much.

    Still maintaining my buy recommendation on P&G. A bet on P&G is also a bet against the dollar. Major reason this past quarter wasn't so good was due to the strong dollar, since much of their revenue comes from outside the US.
    I can't see the dollar remaining strong.
  • PublicEnemy#1PublicEnemy#1
    I have to agree with Ira on this. People don't need X-Box, crappy operating systems, DVD's, and Starbuck's during an severe depression, but they will need starch flakes, toothpaste, soap and cereal.

    Focus on necessity item stocks, not on optional item stocks.
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