No one seems to get it still: housing will continue to decline

By Frank Louis

While I slug away with my local radio show on the housing crisis, unable to get my commentary recognized by the major media, (I am on WNRI, 1380 AM in Rhode Island: The Frank Louis Show and I am read here on RenewAmerica.com, a great space!), the major media publish trash like the "mortgage professor," Mr. Guttentang on Yahoo Finance. I recently read an article he published entitled "Does Property Value Decline Eliminate the Second Lien?" Well, or course not he writes and, in normal times under normal circumstances I would agree. After all, I was never one to accumulate debt aside from my mortgages. Then came 2005 and a crash in housing values that has stolen billions and billions of dollars of wealth from hard working Americans. And, no one is defending these folks it seems except me. I really believe that people who "paid to play," saved and put their down payments on properties that were overvalued due to this mortgage debacle must be treated with the respect hard working Americans, at one time, received. But no, they are not, they are foreclosed on and their hard earned money, often saved over decades and perhaps generations, is evaporated. And the only people we hear stories about in the news are these "poor individuals" who were "misled" into the American "dream" only to have it stripped away from them. It is just not true. Will no one else bring this fact into the light besides me? When I was in south Florida some Columbian people I knew told me that it was just not right that they did not have big homes like some Americans. I told them that some Americans had compiled equity over 2-4 generations and that it did not happen overnight. They, however, did not care, they had sub-prime. Oh well. So much for working for years to get something.

But back to Mr. Guttentag. Let me first comment on the closing paragraph of his July 23 article (if only to prove I read the entire thing). For those of you who were fortunate enough to not waste your time reading this article let me catch you up. He discusses finding a good legal representative to represent you. Well, we have covered this subject until the cows come home already I believe. How many "reputable" sounding firms have I read about in stories you have to search out have stolen people's hard earned money through fraud. Face it; I do not trust anyone out there any longer. I for one am about ready to just "opt out" of the whole system. It is really a disaster. You know that all of this online stuff, secondary markets, and talking to bank reps in India or some other such place is certainly destined for failure. It just has to be. Try calling your mortgage modification department. Let me know how it works out for you.

But anyway. He suggests that, prior to entering these murky waters one do "homework on the firm, which would include interviewing past clients." With all of the "privacy laws" (which even prohibit me, as a land lord, to find out if my tenants have their utilities turned on in the winter months to keep the pipes from freezing), how do you do that? Some "firm" is going to really give you any names to follow up on? So what, word of mouth? Really sir.

So what is it you should do? In one word, "restructure!" Yes, restructure just like the big boys do; it is business and as it is a "legal" obligation to pay as he points out in his opening remarks, it is our legal right (just like Leman, Country Wide, etc) to file bankruptcy and leave these loans in the dust. I hate to say it, but the banks are not interested in restructuring your loan, they are not interested in you keeping your property, they are not interested in anything quite frankly. At the end of this article there is a true story that will prove this point, so read on.

After all, it was "business decisions" that got the economy into this in the first place (subprime, no-doc, no down payment, straw buyers, CDOs... etc) so explain why I need to work my life away to pay for something I was misled about buying in the first place. Face it, the real estate "industry" was not forthright with their disclosure of the environment they were creating when I applied for my loans. Had we (people who pay their way) known what banks were doing would we have placed much of our life savings as a down payments on something we knew would be worthless in just a few months? I think not. We were misled!

Now when I say "misled" I do not mean like those folks who "just did not understand" the loans. You know, the people who really earned very little and bought half million dollar homes with no doc, no money, maybe even here illegally. I mean the people who probably got several thousand dollars cash back at the closing, maybe never even tried to make a payment, then left the property with the cash in their pockets. They may still live there while it is in a "modification program." Who knows? No I do not mean those folks at all. I mean the hard working people who saved for years, maybe put $75,000 or more down on an investment in real estate appraised at $300,000. (As I say, owning property is not a "dream" it is work!) Now they find out it is barely worth $50,000. Are you telling me these people have any legal obligation to do anything but walk away? I can't believe it if this is the advice you give. You are nuts (like most of the talking heads out there who are obviously puppets of the mortgage industry.

We are to work for the rest of our lives paying for something that will never have value in our lifetimes? WHAT? But I have the answer and I cover it on my show every week on WNRI. It is called the "Short Keep." It is the exact opposite of the "short sale." I will explain. It is really quite simple: The bank lets you keep your property for the same value they are obviously willing to sell it to someone else for in a foreclosure or short sale (hence the "short keep.") Maybe even a little more than the bank would make in the short sale. They make more money, it is good business.

How you qualify: If you put down more than 10% or 20% on your real estate purchase you are "qualified." No more questions asked! Now, it seems, the only people getting mortgage modifications are those very people who helped create the problem. Those no doc, no money down, sub-primes. No wonder most of them are falling through. If your only crime was to buy property in 2005 when the mortgage and real estate industries were gamming the system thanks to Barney Frank and Countrywide... oh yeah, Chris Dodd, let's give him his credit too. Well you get the idea. Then there is Charlie Rangel... we vote for these people? No, out of about 3,000 pages of financial regulation, Fannie and Freddie were not included.

Think about it, in the "short keep," no one gets yet another commission on the transaction, no real estate attorneys make the $25 -$50 thousand dollars we read that foreclosures cost the banks. No, just the folks keep their property and their all important credit scores! The crisis stops that day.

One quick example then I'm done: I know someone who told me a great story. They had put $50,000 down on a property that became underwater after a couple of years. They offered the bank the following: "We will keep it if you write the mortgage down to $190,000. The bank refused, foreclosed and sold it "short" for in the mid $80,000 range. You are telling me this is "good business?" I think not. No, the reality of what is going on here in income redistribution, nothing more. So, dump the properties, just like the big boys, it is a business decision, not a moral one. Do not be duped folks by guys like Mr. G here and tune into Frank Louis or read his articles here on renewamerica.com. He is "providing answers to questions no one is asking."

© Frank Louis