His last paragraph is key - does this company really think they are going to do better selling an empty foreclosure home in this crappy market? Here is someone who loves the property and wants to stay there and they are getting the proverbial door slammed in their face. So much for the government bailout. Maybe instead of sending the money to bank execs they could have given it to consumers. I hate stories like this - a lot of people believed the "professionals" when making the decision to buy homes they could not afford. Now they are being let down. If there is any way to adjust the interest or do something so that they can stay why not try??

Another person complaining about buying at the height of the market, getting an interest rate that was very high, buying more house than they could afford. Where was their outrage when they received the loan? Why did they agree to a loan with an interest rate they are now complaining about? Why did they even sign the papers if they couldn't afford the loan?

This is what is wrong with America, and these people get in front of the cameras and wail that they are the victims of evil banks, when they are complicit in their own situation. They want a government fix for making a bad investment. I feel bad for your situation, but you win some, you lose some. That's the American dream.

Mr. Molloy,
I don't feel the least bit sorry for your relatives troubles. Assuming your relative was legally competent to sign the mortgage then no one "forced" them to sign squat. The mortgage is a contract, so honor it. No one is predatory here, take some responsibility for your actions. I can "qualify" for a jumbo loan home mortgage but I don't go out buying stuff I can't "afford." Too bad, so sad but tell your relative to live within their means.

I started a modification process in November 2010 and still have not heard one way or another whether they are going to grant me a modification. I was told to call at least once a week to get a staus on the process.

The only solution to end the housing issues will be to end free trade and bring work back to the US. When companies start manufacturing almost everything the US consumes, then enough people will have work to afford their homes. Limit the size of all business will create more jobs as well. The US is our entire HOME. If the US were more about itself, we wouldn't be seeing so many obstacles holding the middle class back. Home ownership for many is ending, just as our ownership of the US is ending. Eventually, you will not see much of a middle class.

While I'm sure that Michael's relative was a victim in many aspects of this I'm not willing to give them a free ride on culpability.

Mediation requires that there be a common ground for both parties to meet on. In this instance that comes down to the relative qualifying: the minimum and starting point being able to afford a specific mortgage balance from their own demonstrated income.

Despite the lament from Michael I suspect this sort of fundamental is still missing and *that* is why the Lawyer representing the lender was instructed to do as they did (or didn't). And Michael knows this.

My relative with my help has the ability to stay in this house provided certain loan modifications are made and the fees and charges are adjusted.

So Michael... how far does that help go? Are you willing to co-sign for this relative?

The thing I don't understand is...why have the modification program if only very few qualify for it? NPR has consistently covered this story and found-out that the process to modify a mortage is so convaluted that very few people are able to make through the process. It's filled with red tape. People fax in paperwork all the time, send countless emails, phone calls, and often times the bank has no record.

We are no longer the United States of America, we are Bank of America. Banks and corprate America, They make the rules that Americans live by.

I am an attorney working for a law firm that does foreclosures, although I work on reselling the properties once the bank owns them following foreclosure. I have been a loan officer, lender branch manager and have closed hundreds of deals. In other words, I've seen all sides of the foreclosure disaster.

The bottom line is that a buyer signed a Promissory Note in which they promised to repay the loan according to its terms. If they can't honor their promise, sorry, but they lose the house. That was the deal. If they couldn't afford the house, they shouldn't have signed the documents.

Yes, there were real estate agents, lenders, appraisers, etc. who were more concerned with their bottom lines than their clients', and there were lenders giving money to people who had no ability to repay it, but that does not absolve the borrowers from their responsibilities or from honoring the promises they made.

The governmnent's efforts at trying to make the foreclosure process more difficult and longer for lenders has only added more costs and hurdles, such as the mediation process. These hurdles only prolong the inevitable.

As to the letter writer's specific situation, if his relative couldn't afford the house to begin with, paying only interest, they can't afford it now with principal and interest. What is there to mediate?

Yes, it is tragic to see someone lose their home. But, at the end of the day, we have a simple phrase to sum up the closing process: "If you pay, you stay and if you don't, you won't."

A note to the contract-thumping moralists: when I bought my first house in the "go-go 80s", I had an option to take something called an "Adjustable Rate Mortgage." I asked the mortgage broker how this worked, and he answered, "In my experience the rate rises to the maximum as soon as legally allowable and stays that way for the life of the loan." Hmmm. I thanked him and took the fixed rate. Then I asked his opinion on appreciation prospects for that neighborhood. He said, "Hey, I write mortages. Ask your real estate agent." In other words, "I don't do hype." The broker also insisted I put down 10% as a down payment -- 0% was not an option.

This is diametrically different from the "sucker 2000s", when brokers and everyone in the chain lied their heads off to naive buyers. And what residential buyer is not naive compared to real estate professionals? The hallowed "signature on the contract" that moralists keep coming back to was -- in the mortgage bubble's extraordinarily crooked real estate market -- more often than not simply the last step into a carefully set trap which was laid out by brokers, lenders, agents, and lawyers. That it was the buyer who took the last fatal step into the trap does not relieve the real estate industry's primary culpability for the foreclosure crisis.

As for the question above...there may still be issues to mediate.

I am a lawyer-mediator in Florida and I've done nearly 200 foreclosure mediations in the last 2 years. In terms of who's to blame, we could go round and round discussing mortgage brokers, CDOs, default swaps, TARP money, etc. The bottom line is that we are in the middle of an economic crisis.

IMO, they answer is a mortgage only bankruptcy chapter in which borrowers would be screened for ability to pay a modified mortgage, and if qualified, mandatory principal reductions to FMV, and for those who can't afford a modified payment, expedited foreclosure.

As for the issues that can be considered now at mediation, if a modification isn't in the cards, then the generally involve waiver of deficiency and time before sale date. Do not underestimate the value to the lender to have an expedited judgment (consent judgment), succesful short sale, or deed-in-lieu, and the value to the homeowner (waiver of deficiency), cash for keys, and an extended sale date.

It continues to amaze me that over three years into this recession, people like "John Smith" and "Uncle Rob" continue to apply the cold-hearted and naïve just-world theory on virtually everyone facing foreclosure: you can't afford your home so you must have done something wrong. Even if this loan wasn't predatory and even if the family had seen no reduction in income, the depths of the foreclosure crisis are such that reactions to individual cases are insufficient. Each of the millions of homes that have been foreclosed during this crisis contributes to declining home values in the neighborhood, so any homeowner that can work out a sustainable solution and stay in their home is good for everyone in the economy.

While many state governments have built in some additional time to the foreclosure process, that was in an effort to keep people from being mistakenly kicked out of their home and/or evicted in as quick as 15 days in some states. And if you read any article/study about mortgage servicers' incentives in the foreclosure process, you will learn that the "delays" in the timeline are of their creation, in part because they often lose paperwork but also because the longer the loan is delinquent the more they get in fees.

Without knowing all the specifics of this case, the fact that the mediation did not result in at least a reduction to 2% in the interest rate (as most servicers are required to do under the federal Home Affordable Modification Program) is very troubling.

Re Bob's comment that :"Yes, there were real estate agents, lenders, appraisers, etc. who were more concerned with their bottom lines than their clients', and there were lenders giving money to people who had no ability to repay it, but that does not absolve the borrowers from their responsibilities or from honoring the promises they made..." What about holding the aforememntioned industry folks accountable? Lenders and their agents have been found to have deliberately deceived the courts with document irregularities, fraud, "robo-signing", etc, but nobody is held accountable because of a flawed conclusion, that the foreclosure is not "wrongful" if the borrower owed the money. Our legal system requires that the person seeking justice or redress prove their entitlement through a legal system of rules. Since when do we make exceptions for mortgages?

I said months ago when this was first enacted that it would do absolutely nothing but delay the inevitable. I guess I was right.

I really hope Maryland and the Feds choose to enact laws that provide greater regulation over real estate transactions and protection to consumers. And punitive actions to those who choose to flout them.

Having just bought a home recently (and a foreclosed one at that), my experience was similar to the poor relative's above. I had a predatory buyer agent that insisted on an offer price higher than listing ("to be competitive with all the other offers!"), predatory appraisers that included higher priced homes in other neighborhoods rather than recent sales right around the corner, to even the title company that covered their tracks when it was discovered that someone (probably the realtor) forged my signature on one of the documents. The list goes on. This was basically a scam with everyone against the naive first-time home buyer.

Granted, I am reasonably pleased with the home itself and okay with the price paid (not a great deal but still within current market price range). On the other hand, the home-buying experience left me with a really bad taste in my mouth.

It's not clear at all how it is in the banks' interest not to work with people who are willing to pay something. If you as the bank have sold your investors 7% interest based on a 2007 property value, you have zero chance of making your investors whole. If you take the house and resell, you might get 7% interest in a few years---but it would be at WAY less principal. Why not just take less money from the borrower already in the house and skip all the costs of foreclosure?

At least come to the "mediation" meeting with some kind of midpoint offer.

The principle of honoring contracts is not so sacred that both parties should flush money down the toilet rather than renegotiating.

The Bank needs to be convinced that the homeowner will walk away. In my experience, the banks get more nervous when you just cease all communication with them -- but when a dialogue is going -- the conservative banking culture just follows its own script of "we want full payment."

The homeowner really needs to be prepared to go with plan "B" and let the bank screw itself.

My advice? Save your battle for a war you can win!

Walk! Stay in the house long as you can and save your money. Find an apartment with a rent you can afford, and put some cash in the bank. This to shall pass! It isn't worth fighting for a "THING"...It is just a house! It isn't alive, and there are tons of them now, and tons to be built in the future. Let it go and start over. Protect your own financial interests, and stop wondering about why the banks are doing what they are doing...They don't care about you!

Walk, and never look back. If you want a house in the future, then there will be a better one for you. I think the more people that just realize they are fighting a losing battle, and walk, the sooner we can get out of this.

As for the morality of taking care of your own interest, read your contract, there is no morality in the clause. And don't get it twisted, morality, when it comes to banks, is an oxymoron...They have 0 morality, and 0 interest in you, your financial future, or your peace of mind...Look out for you, just like the banks are looking out for themselves!

Folks that do a "strategic default" on their homes are often under the misconception that they can simply walk away from their home, suffer a couple years of bad credit, breathe a sigh of relief and move on. Unfortunately that's not always the case.

Even after taking ownership of the home, the bank can continue to hunt down the "defaulter" for the difference between remaining amount on the loan and the bank's assessed value of the home. Yes, that's right "the bank's assessed value of the home" - which is MUCH MUCH lower than the market value of the home (who is their appraiser - certainly not the same one one I used when I purchased the home. Or maybe it was the same one... hmmm)

I know this to be true in the case of my home. The bank is still pursuing the former owner, even though the bank already sold the home (to me) for market value!

So if the bank is persistent and works through the courts to get the $$$ from the former owner, they will actually come out ahead!

While I am all for personal responsibility and exhausting every possible means to fulfill one's financial commitments, I do think the real estate industry is long overdue for a complete overhaul. From changing how realtors are incentivized to increased regulation and laws enacted to enforce consistency and integrity in their real estate professionals.

Well, I did a strategic default, I armed myself with an attorney first...Just like the banks can use loop holes to screw you, you can use loop holes to screw them right back!

I don't advocate doing it alone. Consult an attorney. It will be cheaper, and you will have more options available to you than you realize. Even after they foreclose on you, which they more than likely will anyway, after stealing every penny from you, they can still come after you...So either way you get it. I say if you are going to get took anyway, leave on the upside. An attorney will be cheaper in the end.

Wallace, that's not quite accurate. It is true that Maryland has default judgments available to lenders when the foreclosure sale brings less than the value of the loan, but the relevant amount is the difference between the sale price at foreclosure and the value of the loan.

The bank's assessed value of the home is not relevant. The simple way to think about it is that the banks don't get to recover more than the amount they lent plus the fees and charges included in the contract.

So, if you paid a particularly low price at a foreclosure sale, you got a good deal, but you created a bigger problem for the previous homeowner. Not that it's your fault, of course.

Marduk, I think you're responding to Galaxis Barrington's comment. (The "posted by" information appears below the comment, separated by a line, which is confusing, I know.)

Marduk,
For the sake of the former (and foreclosed on) owner, I wish you were right. But unfortunately you are not. I know for a fact that the bank is still going after that former owner based upon their gross under-assessments.

Also, I did not get a particularly great deal on this house - I got market value, which was about $100K+ more than what the bank assessed it was worth. Now are any homes around here foreclosed or otherwise selling for that bank-assessed amount? Nope, not even close. But that is what the bank is claiming so they can go after the prior owner and get more $$$.

I don't know if the bank will get what they want, but they sure as heck are trying. Depends upon what the courts say would be my would guess.

Respectfully,
GB