Foreclosure Reality Check
- 04 Oct 2011
- Written by Jim Alger
TALK BACK - In reading the CityWatch article written by Rose Mary Gudiel (link) it is difficult not to have compassion, even if she minimizes the fact that the only reason to modify the terms of a mortgage is obviously deeper than a simple 2 week late payment. For starters, “late” is defined as 30 days in arrears, not 2 weeks. Beyond that, any bank will let you pay current (as required by California law).
The only reason to modify is because you can’t get current prior to sale. Fannie Mae doesn't service loans anyhow but let's get beyond the details of Ms. Gudiel’s individual case and look at the larger issue spotlighted in this article which is equally troubling.
Indeed, millions of Americans are facing foreclosure, many through no fault of their own. But to repeat the politically convenient narrative that “greedy, predatory and irresponsible practices of big banks and their rich CEOs caused the economic collapse and foreclosure crisis” is to have an intentionally myopic view of what actually happened. There was enough “greed” to go around, and not just by bankers.
How many Americans fraudulently applied for mortgages they couldn't afford? “Greedy” bankers may have turned a blind eye to these so-called “liar loans” but to simply blame the bankers lets the “liars” off the hook. How many people asked ridiculous prices for their homes just because they could? Is that not greed as well? Did that greed not play a part in the bubble? How many realtors flipped house after house with winks and nods toward “stated income” loan approvals? Yes, banks allowed credit to flow too freely, but average Americans took advantage of the easy credit and ran the economy to the brink and beyond.
While it always tugs on heart strings to hear the plight of someone facing foreclosure, one should also consider what would happen if everyone decided to live for free and not pay their bills. What business can keep running without getting paid? Don't pay your DWP bill, they turn off the lights. Don't pay your phone, the service is removed. Don't pay your mortgage, your house is foreclosed on. It is that simple.
In fact, if the homeowner was a renter, they'd be out the door in a matter of months. I can't think of a single business that gives its service for free after someone defaults on payments. In some cases, it is a crime to receive a service with no intention of paying and for good reason. Our economy depends on contracts being honored and payments being made for services rendered.
I'm not sure what Ms Gudiel does for a living, but I'm willing to bet if she were to work and not get paid she'd take legal action regardless of her employers plight, and rightfully so. It may be populist to “fight the power,” and of course some politicians grandstand on the issue of foreclosures, but as a business model what do you think is the natural evolution of “we're just not leaving” as proudly proclaimed by Ms Gudiel?
We are already seeing lenders hesitant to loan and a subsequent slowing down of the economy. Who can blame them? With foreclosures in some states taking 1 – 3 years their collateral is being threatened. To add insult to injury, now they get attacked by politicians for not loaning enough. This circle drives down demand, thus driving down home values.
Yes, there are plenty of people who are stuck in terrible situations, and that's heartbreaking. But to justify, or even glorify, the willful violations of contracts en-mass would have a devastating impact on the economy, and each of us.
We as a nation got here. If we're going to get out of this mess we're going to do it as a nation, and that starts with all of us taking responsibility for our actions, not assigning politically convenient blame, dodging our own responsibilities and ripping a larger hole in the deck of this ship.
It may be harsh, but reality usually is.
(Jim Alger is a long-time political activist. He spearheaded the ‘pushback’ effort that culminated in the MOU Agreement between neighborhood councils and the Department of Water and Power. He also served as President of the Northridge West Neighborhood Council.) –cw
Vol 9 Issue 79
Pub: Oct 4, 2011