Finally, Some of Us are Catching On

By a more than three-to-one margin on Tuesday, communities voting on whether to support the creation of a public bank in Vermont approved the idea, calling for the state legislature to establish such a bank and urging passage of legislation designed to begin its implementation.

In a show of direct democracy that also exposed the citizenry’s desire for a more localized and responsible banking system, fifteen of nineteen towns passed the resolution during ‘Town Meeting Day’— an annual event in which voters choose local officials, approve municipal budgets, and make their voices heard on a number of measures put before local residents for approval.

The specific proposal under consideration, Senate Bill 204, would turn an existing agency, the Vermont Economic Development Authority, into a public bank that would accept deposits and issue loans for in-state projects. Currently, the only state in the U.S. to maintain a public state bank is North Dakota. However, since the financial downturn of 2008, other states have looked into replicating the North Dakota model as a way to buck Wall Street while taking more control of state and local finances.

Voicing his support of the measure ahead of Tuesday’s vote, Gary Murphy, a resident of South Ryegate, one of the towns that subsequently approved the measure, explained the thinking behind the plan this way in a letter to the local Times-Argus:

Senate bill 204 would expand the Vermont Economic Development Authority to become a state bank and would start out by depositing 10 percent of Vermont’s unrestricted money into the state bank. The bank would be able to leverage this money by means available only to banks to bolster the economy of the state and cut down on the interest payments and fees that are presently paid to out-of-state financial institutions and other entities. The bank would not engage in retail banking and would not compete with community banks; it would work with community banks to maintain their viability and expand their ability to help create better economic outcomes for Vermonters by partnering with them in projects they would not be able to engage in on their own.

Presently, large public projects are, to a large extent, funded by bonding and other private investment which requires the state to pay interest and fees that often do not get recycled into the local economy. Bond sales are managed by Wall Street firms, which seem to rig everything they can to further enrich themselves. In addition to the fees that they charge for this service, it is possible that they are rigging the process to divert funds that would otherwise be available to the state into their own pockets. While the cost of bonding is relatively cheap now, it will likely increase in the next few years if not sooner and the bond market could dry up. Creating a state bank now and growing it could put us in a position where we can substantially lessen the need to float bonds to fund large public projects.

According to Vermont Public Radio, unofficial results on Wednesday showed the following towns had approved the resolution: Bakersfield, Craftsbury, Enosburg, Marshfield, Montgomery, Montpelier Plainfield, Putney, Randolph, Rochester, Royalton, Ryegate, Tunbridge, Warren, and Waitsfield. The four towns that voted down the measure were: Marlboro, Barnet and Fayston and Greensboro.

North Dakota has had a state bank since 1919. Eric Hardmeyer, chief executive officer of the Bank of North Dakota, said he’s heard from 30 to 40 states asking the same thing: How does the only state-owned bank in the U.S. work? The financial institution, which opened in 1919 to help North Dakota farmers, has $5 billion in assets and contributed about $340 million in earnings to state coffers in the 12 years through mid-2009.

BND lending

Lawmakers in other states are modeling proposals on the Bismarck bank as activists protest bailouts for JPMorgan Chase & Co. (JPM) and other financial giants while their customers struggle with foreclosures and unemployment. Supporters say state-run banks, whose deposit base would include tax revenue and other government funds, would have greater control to develop socially minded lending programs favoring average Americans.

“Because of the Occupy Wall Street movement, there is much more of an interest to put in place state-owned banks to serve the public interest,” Marc Armstrong, the executive director of the Sonoma, California-based Public Banking Institute, said in a telephone interview.

“The benefit to commercial businesses is they receive affordable low-cost loans, including some as low as 1 percent per year,” Armstrong said. “The benefit to the state’s public is a more affordable and competitive rate for student loans and home mortgages.”

The Bank of North Dakota offers below-market lending rates as part of a program for beginning farmers. The DEAL loan, which supports students in college, is one of the most competitive alternative loans in the nation. North Dakota students or those who attend school in ND pay zero fees, have the option of a fixed interest rate of 5.72% APR or a variable interest rate of 1.74% APR effective January 1, 2014 and can count on quality local customer service. Variable rates can change quarterly and may increase. Rate will never exceed 10%.

BND by statute can do anything any other bank can do, unless restricted by statute. Mostly by practice BND does not make direct loans. However, legislative action has given express lending authority to BND for:

  • The purchase or acquisition of bank stock or the formation of a bank holding company.
  • The acquisition or refinancing of farm real estate by qualified individuals.
  • Assistance with post-secondary educational costs (i.e., student loans).
  • Originate home loans where loans are not readily available

All other lending by BND is through participation with a lead financial institution. This lead lender can be any qualified financial institution – most notably a bank, savings and loan, credit union or Farm Credit Services.



‘Bottom-Line Driven’

“We have a specific mission that we’re trying to achieve that’s not necessarily bottom-line driven,” Hardmeyer said.  Another difference is that deposits in most conventional commercial banks are guaranteed by the Federal Deposit Insurance Corp., while the North Dakota bank’s deposits are backed by the state.

Lawmakers in 13 states, including Massachusetts and California, introduced legislation this year that would create a state-run bank or study the notion, according to the Public Banking Institute, a non-partisan group backing the idea.

Financial Crisis

“As the financial crisis deepened and there are liquidity issues around the country, our model was looked at a little bit deeper than it ever had been before,” said Hardmeyer, who may be the only bank president in the U.S. who’s also a state employee. “It has been overwhelming at times in terms of the response.”

The U.S. banking industry opposes the idea and is lobbying against it, saying a state-run bank would compete with commercial banks for business and politicize a state’s lending decisions.  “A state-owned bank? Why don’t we just re-label the state capitols the Kremlin?” Camden Fine, president of the Independent Community Bankers of America, a Washington-based trade group that represents more than 5,000 community banks, said in a telephone interview.  “It’s a socialistic idea,” Fine said. “If you get a state-owned bank that is allocating credit, it can slide very quickly into a situation where those in favor get credit and those not in favor don’t get credit.”

Increase Jobs

Arizona Representative John Fillmore, a Republican from Apache Junction who has introduced legislation to create the Bank of Arizona, said he views it as a way his state could increase jobs while bolstering its treasury.

“We would have a bank, just like a regular bank that you see out there, it would have savings accounts and checking accounts,” Fillmore said in a telephone interview. “But its main function would be to give support to the state and to other banks within the state.”

Efforts to pursue the idea have gotten off to a rocky start in Massachusetts and California. In the Bay State, where legislation was introduced to create a Bank of Massachusetts, a commission said the bank would cost $3.6 billion to start and may expose public funds to “unacceptably high risk.”

In California, lawmakers in September agreed to set up a task force to study the idea of a “California Investment Trust” to boost economic development by easing access to credit for California-based businesses, according to the legislative text. Governor Jerry Brown, a 73-year-old Democrat, vetoed the bill. Brown said he didn’t want to create another “blue ribbon” taskforce and suggested the Legislature’s banking committees look at the idea.

Commercial Banks

The California Bankers Association, a Sacramento-based trade group, lobbied against the proposal, saying a state-owned bank would crowd out commercial banks.

“A state bank has the ability to use the enormous resources of the state to nearly monopolize the market and as a result, create an unfair advantage over commercial banks,” Alex Alanis, the association’s vice president of state government relations, said in a May letter to Assembly member Ben Hueso, who offered the bill.  Hueso, a Democrat from San Diego, said the proposal is aimed at creating a wholesale bank that would lend through commercial banks to businesses and consumers.

Economic Recovery

State-run banks are more likely to be more flexible in their lending relationships with consumers and less likely to engage in proprietary trading and other risky activities by large commercial banks.

North Dakota Economy was ranked No. #1 in economic development in 2010-2012. North Dakota has weathered the Great Recession with a boom in natural resources, particularly a boom in oil extraction from the Bakken formation, which lies beneath the western part of the state. The development has driven strong job and population growth, and low unemployment. It was largely supported by the state bank.

It is not surprising that commercial banking lobbyist would oppose the “state bank idea”. If you have watched how these commercial banks and lending institutions have dealt their hands in places like Detroit or Cleveland and watched as they have extracted huge amounts of public wealth out of the system, it is clear they have no interest in having State Banks pop up.  Why it’s Un-American right?


Reality is it is about as Un-American as the Boston Tea Party, the real Boston Tea Party. If you live in a state seriously considering starting a state bank, get yourself educated to what that means. We think the more you understand the more you will understand the freedom from banksters it represents.

If You Are In Foreclosure, This is a Must Read

After a record 347,420 foreclosure filings and 102,134 bank repossessions in September alone, the U.S. is on pace to top 1.2 million foreclosures this year, up from about 1 million last year, according to new data from RealtyTrac, which collects and analyzes real estate records from across the country.

If you are one of those caught up in this mess, there are a number of things you need to know.  First, do not ignore any notices or requests to appear in court.  Have all of your paper work in order.  However, the most important thing is to make the lender PRODUCE their documentation which establishes their right to proceed with foreclosure.  In almost 75% of these cases THEY DO NOT HAVE IT.  As I wrote in my most recent article, this is a mess.

In a lot of cases, those facing these proceedings are financially strapped and think that they do not have the money to hire an attorney and so tragically they do nothing and are evicted.  What is doubly sad about this is that in most cases they have standing in the courts and could save their homes.  If you are in this situation, there is help out there and you cannot afford not to take advantage of that help.  Read below and may it help just one family.

Source: Herald Online


More than a year before lenders, law firms and document companies began owning up to widespread paperwork problems with their foreclosure filings, Lisa Epstein and Michael Redman already knew that something was wrong – very wrong.

Redman, a former online automobile consultant, got his first taste of the problem in early 2008, when he tried to help a relative who was facing foreclosure.

As he tried to determine which of three or four supposed lenders held the note, Redman, 35, realized that not only did he not know the answer, neither did any of the companies that were asking for payment.

Epstein, a nurse who cares for cancer patients, also is going through foreclosure. She got her baptism in the world of shoddy foreclosure paperwork in the summer of 2009, however, when she tried to help a brain tumor patient keep her home.

Epstein helped draft a letter challenging the foreclosure because, as in Redman’s case, it was unclear from court papers who owned the home’s mortgage.

After arriving at the summary judgment hearing in her nurse’s uniform, an emotional Epstein, 45, watched as the ill woman read their letter aloud in court. When the opposing attorneys never showed, the judge refused to finalize the foreclosure. The woman remains in her home as the legal wrangling continues.

For Epstein, who often helped her patients navigate disputes with their health insurance companies, the role of advocate wasn’t new – but the thrill of a courtroom victory was.

“It was like something struck inside me, like this is what I’m compelled to do. I can be a nurse for people caught in this foreclosure crisis,” Epstein said. “I remember thinking, ‘I’m not an attorney, and there are definite obstacles, but maybe there’s a role for me.’ And I ran back to the hospital like I had wings. I felt like this is my purpose.”

Within a year, she and Redman – who didn’t know each other at the time – would leave their respective jobs to pursue their passion for helping others and exposing injustice in the foreclosure industry.

After meeting late last year at a foreclosure fraud seminar, they teamed up to become two of the nation’s most influential civilian beat cops for the beleaguered foreclosure industry.

Equal parts agitators, activists and advocates, Redman and Epstein have made their presence felt in Florida and nationally through their respective websites, and

Under a sun-drenched sky recently, Redman proudly perused his Web log to see recent visits from the Internal Revenue Service, the Homeland Security Department, the Justice Department, Fannie Mae, the Housing and Urban Development Department and the CIA, among others. Someone from the executive office of the president took a recent look, too, he said.

Major banks also are peeping at Redman’s frequent postings and snarky analysis of embarrassing documents that appear to show foreclosure industry fraud.

Two weeks ago, he posted a deposition from a clerk at one of four Florida law firms that the state attorney general is investigating on suspicions that they’re using fabricated documents to evict thousands of homeowners. She told investigators that the firm’s employees regularly signed affidavits without reading them and put incorrect dates on documents.

“This kind of stuff goes on all the time, and it’s everywhere,” Redman said.

Problem foreclosure documents are the latest chapter in the housing crisis that triggered the Great Recession.

In foreclosure cases nationwide, bank officials have signed sworn affidavits, supposedly verifying their knowledge of the matters in question. However, after several bank officials told investigators they’d signed thousands of affidavits without reading them, the nation’s foreclosure process has ground nearly to a halt as officials investigate the practice known as “robo-signing.”

Major lenders JPMorgan Chase and Ally, formerly GMAC, have stopped evictions to check for bad paperwork in Florida and 22 other states that require court orders to seize property. Bank of America earlier this month halted foreclosures while it reviews paperwork in all 50 states.

On Wednesday, Iowa Attorney General Tom Miller said he’d lead the new Mortgage Foreclosure Multistate Group’s investigation of the problem and propose possible remedies. The bipartisan group includes state attorneys and state banking and mortgage regulators from all 50 states.

In Florida, where one of every 56 homes was in foreclosure proceedings in the third quarter of this year, Redman and Epstein have shined a light on efforts to ram cases through courts without much fact-checking.

Foreclosure defense attorney Chris Immel of Palm Beach County said the ongoing scandal was changing that practice nationally and in Florida.

“A lot of that has to do with the activism of people like Mike and Lisa. They get a lot of attention, and a lot of people look to them because they’re very active with their blogs and their activism,” Immel said.

Whether they’re being courted by prominent print news outlets or interviewed on cable television news shows, doing conference calls with state officials or protesting on courthouse steps, Redman and Epstein are consumed by their new roles.

They’ve filed briefs with the Florida Supreme Court and sent questionable documents to state investigators, the FBI, the Justice Department and numerous banking regulators.

Earlier this year, they led two busloads of people to the state capital in Tallahassee to protest a proposed change in Florida law that would have allowed foreclosures without court orders. The measure was defeated.

When it appeared several weeks ago that President Barack Obama might sign legislation that could weaken fraud protections in foreclosure cases, Redman and Epstein posted an action alert, urging people to call the White House and voice their opposition.

“At one point, so many people were calling (the comment line) that you couldn’t even get through. I absolutely think our silent army is not being silent anymore,” said Karen Pooley of Seattle, a 48-year-old building material saleswoman who credits Epstein’s website with teaching her how to find evidence of fabricated paperwork. She ended up finding suspicious documents that helped a friend get his foreclosure sale canceled.

“Not postponed, but canceled,” said Pooley, who’s also fighting her own foreclosure and organizing local volunteers to look for more bad documents. “Lisa was very helpful in teaching me how to search and get this army started.”

Andrew Delaney, who’s fighting the foreclosure of his home in Ashburnham, Mass., drove all the way to Florida in the spring to meet with Redman. He said Redman’s advice on checking court documents for flawed paperwork has allowed him to avoid foreclosure for more than two years as banks try to prove who holds his note.

So don’t give up and ask for help. Also, if you know anyone facing this situation, please pass this article to them.

The Housing Market is Still a Minefield

Despite the efforts of the government the foreclosure crisis hit a new peak in the first quarter, as banks took back the largest number of properties to date. The number of homes entering REO status (short for “real estate owned” by a bank) climbed 35% to 257,944 — the highest quarterly total ever — from 190,543 in the first quarter of last year and 9% from the previous quarter, according to real-estate data firm RealtyTrac. The increase comes as lenders seized more property that couldn’t qualify under the Obama administration’s Home Affordable Modification Program (HAMP).

The real question here is a rough one.  Should the government intervene or let foreclosures take their own course.  Obviously many people were falsely led into mortgages they could not afford and therefore the banksters and brokers are culpable for the dilemma that so many families now find themselves.  Losing their homes to foreclosure brings with it total destruction of their credit rating which they will likely never be able to restore. However, the other side of the coin is that these easy loans also falsely inflated the value of homes and if the government intervenes, those prices will stay inflated locking out a whole new generation of home buyers and therefore the market will never return to a stable normal situation.

It can also be argued that the government intervention programs had not been that effective and indeed the HAMP program has only helped about 20% of those who are in serious jeopardy of foreclosure. Also “There have been delays throughout the system, and it has taken longer for properties to go from delinquency to default,” says Rick Sharga, senior vice president at RealtyTrac. Once rejected for HAMP, however, these properties are now moving to foreclosure at an accelerated pace, Sharga says.

More properties moving through pipeline

Foreclosure filings — from notices of default to bank repossessions — were reported on 932,234 homes in the first quarter of this year, a 16% increase from the same period last year and a 7% jump from the previous quarter, according to RealtyTrac. And the pace accelerated near the end of the quarter, with foreclosure filings reported on 367,056 properties in March, an increase of 19% from the previous month and the highest monthly total since RealtyTrac began issuing its report in January 2005.

Foreclosure auctions were scheduled on 369,491 properties during the quarter, the highest quarterly total since RealtyTrac began compiling its report.

“There have not been a lot of households that have been successful under HAMP,” says Gary Painter, director of research at the University of Southern California’s Lusk Center for Real Estate. “It’s likely that many of the people who could be helped have been helped.”

The good news is there doesn’t appear to be a huge wave of properties entering default.  In the first quarter, 304,799 properties received default notices, an increase of just 1% from the previous quarter and a decrease of 1% from the same time last year. Default notices have dropped 11% from their peak in last year’s third quarter.

Troubled states
Nevada continued to have the highest foreclosure rate in the quarter — four times the national average — with one in every 33 households receiving a foreclosure filing, followed by Arizona, Florida, California and states where employment has plummeted, such as Utah, Michigan, Georgia, Idaho and Illinois. Foreclosure filings were reported on 34,557 properties in Nevada during the first quarter, a 15% increase from the previous quarter but a 16% drop from the first quarter of 2009.

Foreclosure filings in Arizona were reported on 55,686 properties — one in every 49 households — a 22% increase from the previous quarter and a 13% increase from the same time last year. Florida posted the third-highest foreclosure rate, with filings recorded on 153,540 properties — one in every 57 households — a 7% increase from the fourth quarter and a 29% increase from the same time last year.

Sitting on delinquencies
Just how many foreclosures move through the foreclosure process and when banks sell them will be key factors in how much more real-estate prices could fall before they recover. Most of these bank-owned properties are not making it onto multiple listing services, analysts and brokers say, despite banks having more of them to contend with. “We have about 860,000 REOs in our database, and only about 30% of them are available for sale on the MLS,” Sharga says. “That means you have another 550,000 to 600,000 that have yet to hit the market.

By keeping this “shadow inventory” off the market, banks are keeping prices unnaturally high in this soft economy, says Leo Nordine, a Los Angeles-area broker specializing in REO properties. “Lenders want to keep postponing them for as long as they can,” Nordine says. “Prices have stabilized” in many areas because banks have kept these properties off the market, he says, adding that banks will likely continue to do so until the economy picks up again.

A long, painful recovery
Meanwhile, foreclosure prevention efforts don’t appear to be helping a significant number of borrowers. While 1.4 million homeowners were offered trial modifications under HAMP through the end of March, just 230,000 homeowners had their modifications made permanent. That’s a drop in the bucket compared with the 5.5 million delinquent loans Sharga says are on the books.

Acknowledging this poor progress, the government revamped HAMP last month to provide additional mortgage assistance for unemployed job seekers, increase payments to second-lien holders and give some underwater homeowners the chance to refinance into loans backed by the Federal Housing Administration. This could slow the number of homes entering foreclosure, but it probably won’t make a huge dent in the number of properties being taken back by the banks.

“Many people are so far upside down in their home’s value they are not even eligible,” says Helene Raynaud, vice president of housing for the National Foundation for Credit Counseling. And since HAMP is voluntary, lenders and investors are still deciding which properties they want to take back. “The government is really trying, but there are some issues of accountability and enforcement with servicers.”

And, Raynaud says, there are some questions about how many of these modifications will end in re-default, given borrowers’ still-high levels of debt. Very few servicers are requiring these borrowers to get debt counseling, she says.

Given these factors, economists expect a steady stream of foreclosures to hit the market for the next several years. But they don’t think it will derail a recovery. “I think we are very close to a recovering housing market,” says Celia Chen, senior director in charge of housing at Moody’s “We expect a slight decline and then flat prices until 2011.” However, Painter says you might want to brace yourself for a bit of a bumpy ride.  “I think we are going to see upticks and downticks as the process happens,” he says. “But generally we are going to be stuck in place for a while.”

In 2008, it looked as if Paradise Valley, the wealthiest, most exclusive community in Arizona, had neatly side-stepped the foreclosure crisis. Only 38 foreclosures were recorded in this 16-square-mile town that year. Indeed, the median home price for resale detached homes reached an all-time high of $2 million in mid-2008, according to MDA DataQuick, even as values plummeted elsewhere. “People were buying up million-dollar homes, tearing them down and rebuilding them,” says Jay Butler, director of the Arizona Real Estate Center at Arizona State University’s W.P. Carey School of Business.

The fall
Last year, the bottom dropped out. Like many other luxury-home markets, Paradise Valley joined the foreclosure crisis late: As the economy worsened, companies lost clients and executives lost bonuses or jobs. Affluent residents ran through their savings and credit. And banks, once reluctant to foreclose on major depositors, started taking estates back. People began talking of “simplifying their lifestyle.”

By the end of 2009, the number of foreclosures had tripled to 114, with an additional 315 notices of trustee sale filed, according to the Information Market, a data provider.  In most cities, this paltry number wouldn’t even cause a ripple in the real-estate market. But in this tiny town of about 7,700 homes — owned by celebrities, politicians and businessmen such as Muhammad Ali, Alice Cooper, Dan Quayle, Mike Tyson and Peter Sperling — these foreclosures landed with a thud. Broker sale signs, once considered too gauche for this tony enclave, with its 12 high-end resorts, began sprouting like weeds, as overstretched borrowers began seeking short sales or letting their underwater custom homes go.

The excess
Forget Beverly Hills. Some of the priciest foreclosures in RealtyTrac’s database were in tiny Paradise Valley, and all were recorded last year — such as this palatial property with private theater, walk-in wine cellar, indoor sport court and separate guest house with two-car garage, which was taken back by the bank when its owner defaulted on a $6.5 million note.  It’s now listed at $3.5 million.

“We’ve seen examples of where something that was listed for $10 million sold for $2 million,” says luxury real-estate agent Walt Danley, who has sold homes in the area for nearly three decades. “The run-up did get a little out of control. It needed a correction, but this is an overcorrection.”

A continued correction
Bargains like these should be around for a while, agents and economists say. Even as local economists are predicting that the Phoenix market will bottom out this spring and that prices will start ticking back up, no one knows exactly when the price reductions will stop in Paradise Valley.

The number of sales of distressed properties has grown, as many business owners who took out a credit line against their homes to try to save their businesses got deeper underwater and could no longer afford to keep making those payments. “Short sales will continue to dominate the market for the foreseeable future,” Danley says.

Well is short sale the answer? Consider this:

By Sally Herigstad

MSN Money

Steve and Debbie Martin are losing their home. That’s for sure. The only question is whether it will be in a short sale or a foreclosure. They’ve found a buyer, who is offering less than what they owe. The Martins just have to get the bank to accept the offer.

In the past, that’s been a tall order. Since the housing meltdown began, short-sale offers have often taken months to get a response from overwhelmed lenders. Even then, there have been no clear guidelines about what kinds of offers are acceptable or about how to handle second mortgages that could easily derail the process. Industry experts estimate that less than half of short-sale offers have been accepted, and many real-estate agents have avoided showing these properties altogether. But if the Martins can hold on until April, a new federal program might help.

Starting April 5, lenders in the Home Affordable Modification Program must offer borrowers the option of a short sale, including the minimum amount needed for an acceptable offer, if their mortgage doesn’t qualify for a modification.

Once a homeowner applies to list his home as a short sale, lenders must respond to offers within 10 days. The program also offers $1,500 to homeowners to help them move, $1,000 to loan servicers to cover the cost of paperwork and up to $3,000 in incentives to secondary lenders who might otherwise reject an offer.

The Martins bought their home in 2003, when they needed a larger house for themselves, their three grown children and one grandchild. Steve and Debbie made the down payment, and all five adults signed on the loan. Everyone chipped in on the mortgage payments. The Martins figured that when their kids moved away, they would sell the house and all would share the profits. Then property values in the Pacific Northwest plummeted. As the nest emptied, Steve and Debbie started having trouble paying the mortgage.

Now the Martins can no longer sell the house even for the amount they owe on it. But they don’t want to just walk away. They feel a moral obligation to try to pay back their loan, and they don’t want to trash their and their children’s credit scores. The Martins tried everything before asking the bank to accept a short sale. Steve started taking one of his pensions early in an effort to make ends meet, but it wasn’t enough.

“We tried to refinance,” he said. “We tried that with three institutions, and they all said no because there were too many people on the mortgage. We tried loan modification and had the same issue.” Millions of people like the Martins are finding it hard to hang on to their homes as the Great Recession squeezes both household income and housing values. And many others who owe a lot more than their houses are worth may just want out.

Walking away, however, is a terrible choice — one you could regret for years. Here’s why:

You could get hit with a deficiency judgment. It’s common to assume that if you walk away from your home, the bank can’t come after you for more money, because the loan was attached to the house. But that’s not always true. In some states, lenders can obtain a deficiency judgment for the difference between what you owed and what they got from selling your house.

Florida is one of those states. “No homeowner should walk away,” says Rashmi Airan-Pace, a Florida attorney who specializes in mortgage modifications and foreclosure defense. “Deficiency judgments are very damaging.” Airan-Pace points out that lenders, for example, can seek to garnish wages or place liens on other properties.

Other states, including California and Arizona, are nonrecourse states, which means that laws there prohibit such judgments. You still have to be careful, though; some lenders get borrowers to sign papers obligating them to pay deficiencies anyway.

Foreclosure can ruin your credit scores for up to 10 years. When it comes to the effect on your credit scores, having a few late bills is to foreclosure what having a leaky faucet is to burning down the house. “When a foreclosure is filed against a property owner, that person’s credit will go down 100 points,” Airan-Pace says. “At the foreclosure sale, it goes down another 100.”

She estimates that a short sale would do about one-quarter as much damage to your scores. And though you can start pulling up your credit scores substantially from a short sale or a spate of late payments within a couple of years, a foreclosure can affect your credit history for a decade.

First, do all you can to keep the house

Before you think about letting your home go, make sure you’ve exhausted every other possibility. If you can save your home by working extra hours, staying on a strict budget or taking money out of savings, you should consider it. (In general, don’t touch your retirement accounts, however.) If you just want out because the value is down, remember that a house is still a place to live, regardless of what the market says it’s worth.

You would also be wise to consult a credit counseling organization, such as the National Foundation for Credit Counseling, or hire an attorney. According to the nonpartisan Urban Institute, borrowers facing foreclosure are 60% more likely to hold on to their homes if they receive counseling.

When you hit trouble, the first step is to see whether you qualify for federal programs that help you refinance your home at a lower rate or reduce your mortgage balance. Be patient. And be prepared for lots of paperwork. The Martins say they have faxed more than 80 pages at a time to their lender.

Sam Hussain of ClearPoint Credit Counseling Solutions in Modesto, Calif., says that people often get frustrated when they have to fax the same paperwork more than once. “That’s reality,” he says. “Ask for the mailing address, and use certified mail.” Hussain also recommends you use a notebook to make a conversation log through the process. Write down the name of every person you talk to, the date you spoke and what was said.

It should go without saying that getting your legal advice from scam outfits that advertise in spam e-mails or on utility poles is a bad strategy. As Lee Jones, a spokesman for the Department of Housing and Urban Development in the Northwest, says: “They fold up in the night like a lawn chair and take your money with them.”

It’s also good practice to steer clear of well-intentioned people who are out of their field. Taking advice from friends, relatives and even your real-estate agent can be a costly mistake. A credit counselor or attorney can be helpful if saving your home proves impossible and you seek to complete a short sale or deed in lieu of foreclosure. Keep in mind that banks will want to know that you tried every other avenue first.

One of the tragedies of D2 is how badly it has devastated so many families.  Even D1 did not do so much damage to a emerging middle class. D2 however is basically wiping out the middle class in America.  There are no simple answers or solutions to this current dilemma.  What is clear that this is criminal and there are many banksters that should go to jail. Period. In recent testimony that emerged from the WAMU trial was that some WAMU bankers had fraudulently changed up to 85% of the loan applications they were processing! 85%! These are the guys that should go to jail.  I am deeply saddened by the families that have been devastated by these actions, but we should also learn from this experience that ultimately you are on the hook.  If you know instinctively that you can’t afford it, you can’t! A good rule of thumb is that your home should cost no more than 3 times your income.  I know that in most areas that wouldn’t buy a fixer upper, but that is the point. We need to have the discipline to wait.  It is a consumer’s market and ultimately we determine home prices by the demand we create.

Preparing for a Long Hard Economic Journey

In my most recent articles, I think I have made some rational arguments supporting my believe we are in for several years yet of economic challenges.  These challenges, especially when we hit the second leg down will and are becoming very personal to everyone.  Some of the most startling facts that support that statement are realities like now 1 in 4 homeowners are “upside down” in their mortgages.  By that I mean they owe more for their home than its current value! 1 in 4!  Faced with this reality is one thing, but to be unemployed or under-employed, or lacking job security is truly a tough thing to cope with on a day-to-day basis.  Foreclosures are increasing at an alarming rate.

RealtyTrac® (, the leading online marketplace for foreclosure properties, released its February 2010 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 308,524 U.S. properties during the month, a decrease of 2 percent from the previous month but still 6 percent above the level reported in February 2009. The report also shows one in every 418 U.S. housing units received a foreclosure filing in February.

“The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac. “This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity — albeit at a historically high level that will likely continue for an extended period. “In addition, severe winter weather appears to have temporarily slowed the processing of foreclosure records in some Northeastern and Mid-Atlantic states.”

Foreclosure activity by type
Default notices (Notices of Default and Lis Pendens) were reported on a total of 106,208 U.S. properties during the month, an increase of 3 percent from the previous month but down 3 percent from February 2009. Default notices were down 25 percent from their peak of more than 142,000 in April 2009 but were still more than three times the number they were four years ago in February 2006.

Foreclosure auctions (Notices of Trustee’s Sale and Notices of Sheriff’s Sales) were scheduled for the first time on a total of 123,633 U.S. properties, a decrease of 1 percent from the previous month but still 16 percent higher than the level reported in February 2009. Scheduled auctions were down 14 percent from their peak of more than 144,000 in August 2009 but were also about three times higher than the number reported in February 2006.

Bank repossessions (REOs) were reported on a total of 78,683 U.S. properties during the month, a 10 percent decrease from the previous month but an increase of 6 percent from February 2009. Bank repossessions were down nearly 15 percent from their peak of more than 92,000 in December 2009 but were at nearly twice the level reported in February 2006.

Nevada, Arizona, Florida post top state foreclosure rates
Nevada foreclosure activity decreased nearly 7 percent from the previous month and was down 30 percent from February 2009, but the state’s foreclosure rate continued to rank highest in the nation for the 38th month in a row. One in every 102 Nevada housing units received a foreclosure filing during the month — more than four times the national average.

Arizona and Florida documented nearly identical foreclosure rates, with one in every 163 housing units receiving a foreclosure filing in both states. Despite a nearly 21 percent decrease in foreclosure activity from the previous month, Arizona’s rate was statistically slightly higher than Florida’s rate and ranked second highest among the states.

California’s foreclosure rate ranked fourth highest among the states, with one in every 195 housing units receiving a foreclosure filing during the month, and Michigan’s foreclosure rate ranked fifth highest among the states, with one in every 226 housing units receiving a foreclosure filing.

Other states with foreclosure rates among the nation’s 10 highest were Utah (one in every 275 housing units), Idaho (one in 296), Illinois (one in 305), Georgia (one in 331) and Maryland (one in 407).

Six states account for more than 60 percent of national total
The six states with the most foreclosure activity accounted for 61 percent of the national total in February. California led the way, with 68,562 properties receiving a foreclosure filing during the month — down nearly 5 percent from the previous month and down 15 percent from February 2009.

Foreclosure activity in Florida increased nearly 15 percent from the previous month and was up more than 16 percent from February 2009. The state continued to post the nation’s second highest total, with 54,032 properties received a foreclosure filing during the month.

Increasing foreclosure activity boosted Michigan’s total to third highest among the states. A total of 20,028 Michigan properties received a foreclosure filing during the month — up nearly 14 percent from the previous month and up 59 percent from February 2009.

With 17,312 properties receiving a foreclosure filing, Illinois posted the fourth highest total, followed by Arizona, with 16,718 properties receiving a foreclosure filing, and Texas, with 12,638 properties receiving a foreclosure filing in February.

Other states with totals among the 10 highest in the country were Georgia (12,177), Ohio (11,286), Nevada (11,035), and Maryland (5,732).

Divergent trends in metro areas with top 10 foreclosure rates
Metro areas in the Sun Belt states of Nevada, Florida, California and Arizona continued to dominate the top 10 highest foreclosure rates among metropolitan areas with a population of 200,000 or more, but activity trends in these areas varied considerably.

The Las Vegas metro area documented the highest metro foreclosure rate, with one in every 90 housing units receiving a foreclosure filing during the month, despite a 9 percent decrease in foreclosure activity from the previous month.

Six of the other metro areas in the top 10 — all in California or Arizona — also reported decreasing foreclosure activity from the previous month. The biggest monthly decrease among the top 10 was in the Phoenix metro area, where foreclosure activity dropped nearly 18 percent.

In contrast, the two Florida metro areas in the top 10 both posted substantial monthly increases in foreclosure activity. The Cape Coral-Fort Myers metro area saw a 31 percent increase in foreclosure activity from the previous month, giving it the second highest metro foreclosure rate — one in every 92 housing units receiving a foreclosure filing. An increase of nearly 66 percent in foreclosure activity from the previous month helped boost the foreclosure rate in Port St. Lucie to sixth highest.

The government is trying to encourage bankers and lenders to accept short sales to avoid bankruptcies and foreclosure, but so far the response has been unenthusiastic.  The real tragedy here is that a lot of “baby-boomers” are caught in this web.  They simply won’t have the time to recover because of their age.  Sadly, because they invested in their homes to secure their retirement, 43% of them have less than $10,000 in cash retirement savings.

These facts of reality bring me to the major point of today’s article which is focused to those readers.  Most of you have resigned to simply just work until you die because you rightly perceive you have no choice.  I am going to challenge that thought just a bit and in doing so I first must say that anything I say should not be considered in any way as advice or guidance.  I am just one stubborn old nut-job rambling out loud with you listening to me talk to myself.  I believe we have been conditioned to consumerism and as such we have bought hook, line, and sinker this reality that above all we should protect our credit rating and that we are somehow bad people if we don’t pay every dime back to the banksters with their exorbitant interest rates.  I say BS.  I say take a long hard look at where you are, but only in the context that you need only four things in your retirement.  Food,water,clothing and shelter.  How best to provide those basic requirements may look a lot different if you thought of nothing but that.  For example, if you are 55, upside down in your mortgaged house paying $1200 to 2000 a month on a mortgage, and still have 15 to 20 years left, Why?  In most markets there is no ceiling on mortgages, but there is a ceiling on rentals.  You could be saving $500 to $700 per month and living in better quarters in a rental and you are free to adjust up or down on that expense without penalty.  Just a thought.  I know I will get a ton of mail from “professionals” telling me this is bad advice and as I said THIS IS NOT ADVICE IN ANY SHAPE OR FORM.  It is simply a thought from a rebellious ole …well you know.

To be free of a large debt burden seems much more preferrable to slaving away until the last breath to further enrich thieves who could care less about my welfare.

D2 and the Rythmns with D1 – Banks Stuck with Lots of Property

The universe operates in a rhythmic fashion.  You know the old saying “the more things change, the more they stay  the same”.  It is certainly the case with how D2 is unfolding in relationship to D1.  In previous articles we discussed how in D1, and after the stock market crash of 1929, that the real impacts, such as bank failures didn’t occur until 1932-33.  What really precipitated the bank failures and eventually even President Roosevelt declaring a bank holiday was the banks’ assets were crushed with a burden of foreclosed property.  At first it was homes and mortgages, but the final burden was commercial real estate assets reverting to the banks’ ownership.

We are now beginning to see the same exact thing happening now.  Already in 2010 there have been 857,600 foreclosures recorded.  The reality is weighed against nearly 5,000,000 foreclosures in 2009 and at least that same number awaiting in the wings for 2010.  The end result of this coupled with tightening credit markets, declining incomes, and reservations by potential buyers is a deflationary effect on the sale price of homes.  Already, even in the prime markets, housing values have dropped significantly, averaging 30-40% nation-wide. This is especially true on the higher end properties.

In such a market, people facing foreclosure have a potential to limit their liabilities by SHORT SELLING the property.  However, short selling requires the co-operation of the buyer, the seller, and the mortgage holder in order to be successful. This becomes really problematic however, when there is a second or even third mortgage involving the property.

The following article, “Short-Sale Program to Pay Homeowners to Sell at a Loss,” first appeared in The New York Times. To summarize some points of the article here is to provide homeowners with some knowledge of what may be available to them. In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions. More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done. For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around. Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

However, there is great concern because the proposed program is tailor-made for fraud.  If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it. The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?” Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said pre-foreclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales. Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan. “This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

If you are a homeowner in distress, this may be an option for you, but be informed and be prepared to have to battle to get the best deal possible.  If you have second or third mortgages on your home, you may find even the newest assistance will not be available to you.  If you can, prior to looking at a short sale, consolidate second or third mortgages with some other debt instrument not tied to your property that may enhance your opportunities to take advantage of this new program without remaining “upside down” after the short sale is completed.  Learn as much as you can from your realtor or lender.