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The Anatomy Of A Foreclosure: The Sad Decision to "Let the House Go"

****Good Morning America called me this morning and asked to interview the real "Jake". Jake agreed and will appear on Good Morning America tomorrow, (Saturday). Segment is on the housing crisis in California. Talk about the power of ACTIVERAIN! For anyone who wants to see the REAL "Jake", tune in tomorrow!

It is the call that every mortgage broker dreads. "Should I just LET THE HOUSE GO?"

The house, which was owned by both Jake (not his real name) and his brother, had been purchased with 100% financing in an overheated California market, resulting in a $500,000 price tag (now worth about $325,000). Along with it, came the requisite $500,000 mortgage and the albatross payment.

It was one of those transactions that would NEVER have come to fruition without the lethal combination of 100% financing and stated income loans.

Jake insisted on refinancing a year after he and his brother bought it. His brother had moved out, and his lady love (now living in the house) insisted she be on the title instead (but did not have the credit to go on the loan).

He couldn't REALLY afford the payment all by himself...I figured the chances of the relationship working out were small. But Ladylove insisted that she would make half of the payment. Brother insisted he be paid half of the equity so he could move on.

I begged Jake NOT TO DO IT.

The market was beginning to sag already, and he wanted another 100% loan, squeezing what little equity there was to pay off his brother. His payment would go higher, but he told me he could always "refi out".

Refi out = (1) EASY CASH every couple of years (2) The solution to a mortgage you cannot afford.

This is how loose lending practices and rapidly increasing values lulled Californians into a false security. How could they know they would be caught in a spider web of declining values a year later?

I explained to Jake that he was overpaying his brother for the property. I advised them to sell instead, while they still had equity.

Everyone involved laughed at my notion that the house would go down in value. Naturally, I refrained from mentioning my opinion of their relationship. But oh, how I wish I would have at least said SOMETHING.

Something like this: If she moves out, you cannot afford this house. If the price goes down you will not be able to sell the house, or to refinance.

I am reminded of how this housing crisis has caused me to SPEAK without reservation about the RISKS associated with buying real estate.

I no longer SUGAR COAT.

So, the brother moved on, and, not surprisingly, so did the Ladylove. The house plummeted in value. Jake's business slowed to a crawl as the housing crisis caused his customers to stop spending.

Oh, sure, he tried to keep up. But the stress is ruining his life. His other bills have fallen behind. He has taken a second job. He is looking for a roommate. And he feels an enormous guilt for abandoning this obligation. An enormous fear of the future consequences.

So reluctantly, he is LETTING THE HOUSE GO. He can rent a house for a third of his payment, and catch up on his bills. He can sleep at night.

Another foreclosure sign goes up.

Sadly, I wonder how the world will judge all of the homeowners that were trapped in that web we call the housing crisis. Hopefully, not too harshly.

Written by Janet Guilbault, Mortgage Lending Expert Based Out of the San Francisco Bay Area

Posted by Janet Guilbault California Mortgage Banker/Broker on 02/21/2008 12:10 PM

Comments (86)

california mortgage expert, declining values, stated income loan, real estate commentary

86 Comments on The Anatomy Of A Foreclosure: The Sad Decision to "Let the House Go"

FEB

2008

Janet, that is a sad story, and what is even worse is that it is happening hundreds of times a day.

My reaction was the same....it is just very sad that this had to happen. But I thought it gives some perspective to HOW this happened to REAL people that are not flakes. They DID understand their mortgage. No one lied to them. They just bought a house and got a loan because they could, and because this is the American dream.

Then it all backfired.

You hit on something here that I've been wondering...with so many people losing their homes, how will the credit markets view these folks a few years from now? I wonder?

Bob Mitchell

ValueList Real Estate Services, Inc.

Bob: I have to wonder this myself and I am asked this often. Would anyone else like to take a stab at this?

One thing for certain, everyone will look back on these folks as victims of a disaster. Just like saying to someone; "Oh, you were in Katrina"

My assumption is lenders will need to make loans to these people, but people will pay a higher price for financing.

The real problem is that real estate is NOT a short term investment, and people were essentially buying "on margin" and cannot pay the "call."

Janet, Very well written piece. Plenty of blame to go around on this one. When you get behind the specifics of a deal gone bad sometimes I feel less sorry for the participants !

Janet, What a sad story. I am sure that it will be repeated many times.

Very tough situation that is hitting manty people these days. hard for so many people...

Ole George Jones sings a song called Choices...The Chorus:

I've had choices
Since the day that I was born
There were voices
That told me right from wrong
If I had listened
No I wouldn't be here today
Living and dying
With the choices I made

I just don't feel any sympathy, and I do feel a little anger that these 'choices' have had profoundly negative effects on the industry across the board. Some exceptions, I know...

Another word comes to mind...Responsibility.

And another...Accountability.

Certainly the lending and RE sales communities had green in their eyes, but I get offers from Nigeria literally every day promising to make me a millionaire I do not take. My sense of personal responsibility tells me to vet these offers and weigh them against both my individual financial situation and the larger one around me. Anytime the dream is easy to reach, begin wondering if your really wanted it after all...

(I know, the Nigeria thing stretches it, but replace that with any bum loan offer, if you will)

It is a sad story. I just about always tell buyers "if you can't go out to dinner with someone because you have to make a mortgage payment, then you don't need this house" If more of us would speak up, we could have helped our friends.

Richard: I am not sure those buying were sophisticated enough to realize they were buying on margin. It is so very easy for us, with a far greater perspective, to see the risk involved. But this is just a guy, who wanted to get in the game, like everyone else. He is a hardworking American, who had perfectly good credit, and a perspective that never included a house going down in value. I am sad for him It makes the housing crisis painfully real.

Bill: In this case, my heart aches for him. Maybe he did not act with responsibility, maybe he should have heeded my advice, but he didn't. Should the penalty be so steep? I can't help but wonder.

Rick: I think this story is probably a classic story. This is why I wanted to tell it. These people are not always flakes. They care. They just got caught up in some VERY bad timing.

Al: And still many more to come, I am afraid.

Joe: Great little poem, thank you for sharing that one. I am surprised you feel no sympathy. I do. I hate that this has happened to him. Here is the personification of the housing crisis.

Do I think he should be pardoned from all responsibility? NO. Do I think it is the fault of loan officers that arranged these loans? NO. These were legitimate loan programs at the time, Joe.

They were offered on the premise that the borrower need not be that strong because the property that secured the loan was going up in value so rapidly. The almighty appreciation in real estate would save us all.

Hindsight is always 20/20. Those loan programs were stupid. That is why they are gone.

Janet,
a typical story. Jake had choices. But there are a lot of stories I hear where the broker lead the client who trusted them into situation where they paid high points, interest, and the mortage rate became unaffordable after 2 years. There is a lot of talk about the banking Alliance helping. But not one wants to take a loss so I suspect a lot of what is being said is window dressing. AJ

Larry, Yes, I always review what I could have done differently. I wish I would have come on stronger.

There were 3 people telling me to move forward....and I felt I could not use the argument of "what if this realtionship does not work out" because Ladylove had actually referred him to me.

So I instead attempted to convince them that the writing was on the wall about values. They ignored this advice. What is maddening is the brother and Ladylove walked away unharmed...the 2 people he loved enough to try and help.

Hi AJ: What is the banking Alliance? Meaning the banks that have pledged to help those borrowers in distress?

Janet, I agree with you on so many points.

Some of my clients made decisions to buy, or to refinance, which I did not necessarily agree with them. But if I didn't serve them, they would just buy or refinance from another agent/officer (since the market was cluttered with tons of real estate agents and mortgage lenders).

So I gave them all the pro's and con's and my opinions. The final decision is up to them to make.

In the end, each borrower has to stand on their own and be responsible for their own decisions. We can advise them, as you did. But they are ultimately accountable for their choices, good or bad.

I've done a lot of research, and discovered that there are several reasons why homeowners are in foreclosure right now:

1. Short-terms loans such as "hybrid" loans -- fixed for 2 years, then adjusting upwards with enormous increases. Also "neg am" loans, which are meant to be refinanced.

2. Property values declining significantly. Which means that those with the 2/28 loans cannot refinance. Especially if they fit into category #3.

3. Risky financing -- 100% LTV and stated income.

4. Job layoffs or lack of income. Anyone who works directly in the real estate industry has probably seen their income cut to 1/4 or 1/5 of previous years. So many real estate professionals can't keep up on their mortgage payments -- especially those who invested in "spec" property. Refer to item #5 below.

5. Bad investment decisions -- depending on rising equity for their property purchase, or depending on high income levels to cover a negative cash flow on investment property.

The bottom line: "Jake" is not alone. This is a monumental nation-wide crisis, not soon to be forgotten. But for those trapped in bad situations, they still have to deal with the everyday reality of losing their house. As a Broker, I urge homeowners to explore every possible solution before walking away and allowing the lender to foreclose.

That's why I wrote my new eBook, "Stop Foreclosure Fast: Solutions to Save your House", soon to be released on www.Stop-Foreclosure-Fast.info this month.

My goal is to help reach 500,000 homeowners -- one family at a time!

Regina P. Brown, ePro
Real Estate Broker
Loss Mitigation Consultant
www.RealEstateProExpert.com

Janet - I hope everyone in this Industry decides to adopt the mantra, "I no longer SUGAR COAT." While sometimes harsh, there's a virtue in that.

Regina: That is fabulous. I think I must agree with you about the reasons that people are in foreclosure. I have written most about item # 3 because here in California, that is really the only way most people could afford to buy a house. So all of us in the industry were flooded with requests for that deadly combo 100% financing combined with stated income. Even those that could put money down chose not to. They figured the equity would soon be there via appreciation.

I know there are multiple themes going on in this post. Should/Could I have done something differently? After all, I knew the risk was high and I was his advisor.

How much should we blame him? Can you tell me if you have written a more in depth post about how you advise a homeowner to proceed in this situation? If so, please send me a link.

Jason: I am a sugar coater. One of my weaknesses, as you must know. However, needing to tell so many people that they have no equity and cannot refinance has given me more practice than I care to think about.

Having to tell so many people that they cannot buy a house because they just can't qualify has taught me that the non-sugar coating approach is actually a quality in a mortgage broker must people want.

Janet, So sad. But I hear this story every day. Not much they can do. Giving up the house and moving on with their lives is sometimes the best solution. No sense throwing good money after bad. It's just a house.

There are several types of foreclosures in our markets. These are by far the minority. When I hear stories like these it breaks my heart. It also breaks my heart when a tenant gets no notice. That is the majority of the stories that you hear here!

sad to hear but that just happens to be a realization of life

I find the sad part of the picture is the people who were responsible and who are taking second and third jobs to make their payments, and aren't getting any relief.

Janet~ This story breaks my heart as well, and I know all too well why it happened. We used to live in Pleasanton, lived there for over 8 years, and rented while prices of housing soared around us, and everyone one it seemed bumped up from moderate houses, not once, but two or three times, without so much blinking, and made a killing in the market. We used to think we were "never lucky enough" to get into that market at the right time...now I'm not so sure. What would we have been willing to try to get into...? I shudder to think!

Janet - I understand your points. But, you stated yourself in your post you 'begged him not to do it'. You knew the potential consequences, he chose not to listen. I agree with your statement that he 'is the personification of the housing crisis'. He had other choices, he had other (arguably better) options, but he choose a risky path.

Keep in mind the hyper-appreciation to which you refer (especially in CA) was driven by a symbiotic relationship between sellers, buyers, RE agents (edit), lenders, and appraisers, plus developers. If any one party had stepped up and said no(!), reason may have prevailed. You also ran into droves of people leaving high-density areas like San Fran where the prices were closer in line with a limited housing supply in a crowded city, and heading to Modesto or Stockton, or elsewhere, to commute and not thinking twice about paying huge prices for what they found.

We sold our house in the central valley in 2006 for just under double what we paid in 2002. Really. It was what the going rate was at the time and we priced ourselves with the comps. I think we got out the week the bubble burst. What made it possible for us was the fact we were in an older home and most buyers by then couldn't pay >$350,000 for the new construction that was prevalent. Then we promptly left CA...;)

People do not understand that your home is your biggest investment not your best ATM

Wow Janet great story but all to true. I dont know why people insist in getting themselves into more trouble and not facing reality.

It is not sensible to refinance so soon after buying a house with little or nothing down and that is of course what happened if I am reading it correctly. The reason people do walk away is because they put so little or nothing down to start. And as we all know as appreciation slowed, stopped or went backwards in some areas these things have happened. What goes up must come down. A law of physics and finance. Greed on the part of consumers , lenders, realtors and everybody contributed to the situation we are in currently. This will change and has changed but it will take a long time for some areas of the country to bounce back. Keep the faith!

Trapped? If one purchases an equity on the stock market and it's value declines, one accepts it. Would you borrow 100% of the money to purchase a stock? No one would accept that kind of risks. Yet it seemed the norm in purchasing real estate.

I would prefer the euphemism of painting themselves in the corner. This was no-ones doing other than the borrower.

BB: Why is it so hard for me to admit that letting the house go is the best thing? It goes against everything I believe in. I am having great difficulty with this one, somehow assigning myself some blame.

I guess I know he must move on, and that he really cannot continue to sink into the quicksand any futher. But I just can't come to grips with it.

It may just be a house, But he is a real live person in a "HOUSING HELL". It stinks

Janet - A great post that puts the human side on this crisis that we are in. Every time we go on the internet we are all harrased by ads urging us to refinance today - a $500,000 mortgage for just $1800/month, etc, etc. These people made a calculated gamble - if they had made the same gamble in 2000 and had to sell in 2004 everyone would be high fiving them for how much money they made just for living in a house - Unfortunately their timing was off.

This is a great depiction of the landscape of today's market. It is sad but true that many people are finding themselves in similiar situations accross the country. I hope the best for "Jake" and all of the "Jake's" out there. Great post.

Joe: Why didn't you add real estate agents into the symbiotic relationship? Are they exempt in your mind?

Do you think that a real estate agent should have/would have stepped up and said "NO" do not buy this overpriced house? Then why would you think a lender, appraiser, a developer, or any other player should have done this?

You are fortunate to have sold when you did. The house in this post is not in the central valley. However, it is in Contra Costa County....the side that is adjacent to Stockton, and it will take years for that area to recover from this.

In other words, I could offer Jake no hope whatsoever that this might blow over in a year, because I don't think it will.

PS I was born in Kentucky...Louisville as a matter of fact.

Renee: It sounds like your foreclosures are mainly investors? I am closing on a loan tomorrow in Las Vegas. My California investor has bought 2 houses there...both bank owned. Even though these homes were selling for half of the original value, I wonder if this investor is making the right decision....or will be facing an even lower value.

Surprisingly, I was able to get the investor a 90% loan. Bank DID NOT knock the normal 5% for declining values. Maybe the bank thinks it has declined enought.

Janet: This had "accident waiting to happen" written all over it, with no fault to you. We can't take responsibility for others mistakes if we have given them good counsel.

Owning a home is the American Dream and the many flexible loan programs allowed some individuals to purchase their dream. Unfortunately what occurred in 2005 caused property values to skyrocket (investors purchasing 5 - 10 homes at a time and flipping them before close of escrow). As the market cooled and property values declined, the investors who were stuck with properties decided to walk away; these were the original foreclosures that started the whole debacle. The second tier foreclosures were the 100% financed properties without ability to refinance, those owners walked away without choice because the lenders felt stabilizing the rate was not enough. So now you have lenders with a portfolio of bank owned properties and no buyers or fewer buyers than properties.

I am very sorry for those who lost their homes because the "bank" just couldn't live with the 5.00%, now they have 0% on a loan that was being paid on time. For those who are currently going through this, I sincerely hope that there is help because it's really in every ones best interest.

Hey, Pete: I am wondering if the fact he had 100% financing had anything to do with him wanting to walk away. If he had $50,000 in the place I don't think it would have made a difference. He would still be unable to refinance and unable to make the payments.

But the 100% certainly meant he went underwater much quicker, that is for certain.

Thanks, Patti for showing so much heart, and that very accurate description of what has happened in America. Also thank you because when this happens to one of your own clients, you always second guess yourself. "That should not happen to MY client."

I am also very sorry to those that lost their homes. It is obviously agonizing, and one of the worst things that can happen. He did call his lender at my advice, who offered no help at all. Kind of like, "ho, hum....not another one!".

Janet - I didn't include RE agents because I said it in my head and didn't type it. I knew when I proofread it seemed to be missing something...;) You are exactly right...the agent certainly could have been the one to break the chain. I went and edited the previous post.

I'm a Louisville native, but spent 5 years in CA working in aviation...What took you away?

David, yeah, if you only knew how many calls I take that begin like this:

"My timing sucks. I bought at the top of the market". Lots of times the conveniently forget that they also tacked on a $150,000 equityline that they spent with abandon as if it were free money. And they wonder why consumer spending is off. Hello?

And now the house is a statistic. So is the owner.

I've had an investment buyer wishing he'd never bought. He's typical of so many who paid a fair price, $771,000, but when the house was finished, 11/05, he listed it for $995,000 for resale, a good $150K over market. I tried to get him to list for no more than $850K It might have sold although the market was really slowing down, I thought I could have sold it for $850K. So, it sat and sat and he finally rented it. Now the lease is up and he wants to know what he can do. He'd be lucky to get $650K for it now. A major builders is building $700K specs in the same neighborhood with great incentives.

Sometimes owners just won't listen.

Good job telling this story Janet. It's a sad turn of events...

Every place has a story. Ultimately people have to take responsibility for the decisions they've done concerning the mortgage.

It is too bad when clients don't listen. I have felt very fortunate that all of my clients are okay -- The one I was most worried about really worked hard to improve his credit and was able to get into a fixed FHA -- whew! It is heartbreaking to see what is going on. I was living in San Francisco during the mid -80's with the savings and loan crisis -- it is incredible that some of the loans were made in the first place -- it looks like history is repeating itselfl.

Janet - Such a sad story, and a reminder of the real heartache behind all the foreclosure numbers. I just saw a story on the news today about a fellow who lost the opportunity to get a 6-figure job because of a clerical mistake on his background check - and his house was in foreclosure.

Oh Janet, we see this all too often, don't we?

Jackie: This story makes the housing crisis too close for comfort. We sometimes forget these are real people not just statistics.

Joan: I have been able to "save" some of my clients also, but always feel as if I am racing against a clock..every time it ticks, the value of a house goes down a little more. If I don't move quickly, the loan is dead in the water.

Robert: Yes, this client in no way blames me, or the real estate industry. He isn't even mad. Just depressed...feeling this is the worst time of his life. And what can I say to him? Certainly not, I told you so. So I sympathize, and tell him I will help in any way I can.

I'm not going to be as nice.

While we are all going easy on Jake, he is walking away scot-free. His credit will take a hit for a few years, but that is about it. Meanwhile, the lender is probably going to have to dump the property, and it will end up costing them $250,000. Multiply that by a few thousand.

Now we have people losing jobs and businesses failing. Of course, they share some of the blame... they loaned money on stupid programs...

But, Jake signed up for his pain. And he is the one that isn't getting the full dose.

Yes, Missy, we do. And it still hurts me everytime. And I still feel terrible that this is happening in our industry.

Kevin: Thanks. Guess you can tell I really like this guy and am feeling helpless. Not a normal feeling for me.

Lenn: Part of the problem in Calif, at least, was no one WANTED to listen. Everyone thought they were so smart, and would be so rich, that when the market started to turn, it fell on deaf ears. There were also many who were too young and had no perspective other than a booming market, where real estate was such a hot commodity that there was intense competition for every house that went up for sale. It really was a kind of madness.

Now we have all learned a harsh lesson.

It really is a misnomer that they owned anything. At a 100% their share is 0%. We better get used to it! This is the first of a tsunami of many, many more foreclosures to come! 100% on a $500K loan? What were they thinking? I can think of greed, ego and pride why someone would do this! If I owned a higher end home in the past...80% of the home was mine. If you can't afford it, you don't buy it. Walking way....everyone suffers with mistakes like this! Neighbors that have worked and saved, neighborhoods, home prices, banks, marriages, relationships etc...? Walking away is the easy part. Rebuilding lives, relationships is a lifelong process. Let's hoe there was a lesson learned. I for one am not too sympathetic to this loss. My heart goes out to those that have lost homes over the years due to illness, death of a spouse...or reversal of fortune.

Joe Hayden: I was a corporate brat and Daddy was transferred to California. We all fell in love with the place, and stayed. My parents are from Nashville. I got to Calif. when I was 16, was raised mostly in New Orleans. Sometimes I slip and say something like this: I'm fixin to go to the store.

In California, no one is ever fixin to do anything. LOL

Yes, Jim, I would agree...he "owned" nothing. But then, the word "own" means something different when it comes to our homes. It means we are not renting. It means we are responsible for that property. In means we obligate ourselves to the care and custody of that little patch of the world. You could say nobody owns anything until the bank is paid off, and that would include everyone with a mortgage. But a lot of people would disagree.

I should also point out that a $500,000 house in Calif. is not higher end. It is entry level. And that is why 100% financing is not considered that odd. It was not greed, or ego, or pride honestly. He just wanted a house, like everyone else did, before they appreciated beyond his reach. He could afford it as long as both he AND his brother were making the payments.

Walking away has not been easy at all. It has been the most gut wrenching decision of his life. I would say you put him in the catagory of reversal of fortune...

We all know this type of story has become all too common. The only difference is, I would have addressed the part about what would have happened if "lady love" were no longer in the picture. That's both my strength and sometimes a weakness. I'm pretty direct with people =/

Lisa: I am not sure if you read all the comments because there are quite a few. One of the things about this transaction was that Ladylove was the one who referred him to me. She was always present at every meeting, and it just somehow seemed like a betrayal to go behind her back to question the relationship. Does that make sense?

I have had to learn to be direct and it is hard for me. I was way too deep in the drama on this one. Story is oh, so simplified and streamlined. This one should be a novel, which is why it is ironic that it has this sad ending.

Janet - Yikes! That is tough that your market has sagged so much. I follow our local real estate market VERY closely and we have been averaging 22 new listings each week and 1 foreclosure a week. I don't think that 5% is too scary, but we also have not seen home prices sag yet. I really appreciate that you tried to say "No" to your client. We say No all the time when our clients come up with bad idea, but the sad thing is that they will typically just get the loan or buy the house though someone else, so it is tough to refuse the business. Regardless, thank you for sharing your story.

A sad story indeed--You have to wonder how the multitudes of people who have had foreclosures will ever resurrect their credit scores. It's going to take a long time.

I'm an OKie and we're always fixin' lo do something & figurin' out something... LOL

If only we could "figure" out what to do with all of these situations!

So far there is not too much of this in my area...but I'm hearing so many sad stories on-line. Often its medical expenses that creates this situation. Often the person involved had medical insurance that let them down. That's the worst. You are sick and unable to do that much, your insurance doesn't cover squat and suddenly, you are thrown out of your home!

This is such a sad story, but a great and timely post. I really don't know how bad it's going to get here, but we are noticing quite a rise in short sale activity. People want to get out of these situations. I find it very interesting how some people conveniently forget the second mortgage that they took out and already spent. It's going to be a while still before people become accustomed to the fact that homes are no longer ATM's. Just the same, it's always sad when people lose their homes.

FEB

2008

Lisa: It is as if those equitylines don't count. Many times a client will not tell me they have one because it somehow does not count as a mortgage. People are already painfully aware they have no equity to spend. That is why retailers are going out of business right and left. No one has any money to spend.

Ruthmarie: Don't even get me started on health insurance!

Judi: I am fixin to be figurin it out.

Ryan: You are fortunate that your prices are stable. That is a big reason why you have so few foreclosures. We went a little over the top here in California with crazy prices and a kind of mania to buy. I looked at your profile and that is certainly one beautiful dog you have.

This is a sad story. And the same sad story is happening all over with many variations.

Janet.....I love how you tied in the Spider Web to this story. Unfortunately, many people would like to think the web caught them when its the other way around. I am thinking of the Bug flying slowly towards the beautiful light (the American Dream).....eventually....if your not smart enough.....you get ZAPPED!

Janet, hopefully anyone that has seen the cycles before will reserve judgement on those caught in the foreclosure crunch, at least until all of the details are presented. Your scenario is likely a whole lot more common than many would expect. Great point.

These stories are sad. But, so many made bad financial decisions. There is a lot of blame to go around.

Okay, Robert, you tied that spider web into the story way better than I did. Lots and lots of bugs got zapped by flying straight into that beautiful web...now being eaten alive. Thanks! Brilliant and wish I would've thought of it myself.

B & C: Wanted to write this because we often forget that it isn't just one bad decision that leads to a disaster, it is ususally a series of bad decisions...in this case, based on helping the people he loved.

Laurie: This is why I am hoping we will not view these folks too harshly. They are not credit criminals. Some may disagree....Jake had good credit and good intentions. Maybe he didn't listen to my advice, but you had to be in the frenzie of the era to really understand it. You also make a great point

Dan: He is guilty of a bad decision. But if a loan is available, and he can qualify, he is going to grab it when prices are going though the roof. The loan should have been labled: This loan could be hazerdous to your financial health...same lable should have appeared on Ladylove LOL

Sadly, stories like this are commonplace in markets that were overheated like yours. I applaud you for doing the right thing and advising him of the risks, and thinking just beyond your own paycheck.

My guiding light is always "What is best for the client?" I also always tell every client one of their options is to do nothing. Amazingly, this option is often overlooked.

My wise and wonderful father told me at the beginning of my career:

If you aways do what is best for your customer, you will never need to worry about your paycheck. It will arrive"

Best advice I ever got.

This is a very sad story indeed. However, there is one winner in this situation: The brother who was bought out! Okay, he didn't get any cash, but his credit got away unharmed. I hope he appreciates his good fortune.

Janet - Yes, I do think that we our market is holding strong because it did not go overboard over the last few year. While we did experience large price increases, I think that prices were more catching up to where they should have been as oppose to inflating beyond reach. Thank you your kin words about my dog. She is a beautiful mutt.

Just had a seller last night decde it was best to throw in the towel. They had a horrible neg am mortage adjusting, it is worth $70,000 less than they owe. They are already almost 4 months behind with a processor or someone from the court hassling them about vacating the premises within 20 days. With 2 different lenders etc. The sellers are very emotional and even with a short sale they may still go into foreclosure before we find a buyer or get the short sale approved. Vacating, accepting the foreclosure ended up being more appealing than dealing with more stress and maybe end up in foreclosure anyway with a short sale. Call it lack of financial literacy or predatory lending, either way there are millions of people that were caught up in refi and equity fever that are being financially ruined, especially here in Palm Beach County, Florida. The amazing thing is how much equity was pulled out and not one cent was spent on the home and sellers thought that a year later someone else should pay them $100,000 more than they paid for the same exact house?

The sad part is, they are one in a million. We're going to see a lot more of these stories REAL Soon!

It is a sad story that is all too often repeated many times over.

D. Bass: They are just another statistic, but real people none the less.

Don: And there is nothing we can do about it! That is the frustrating part

Shannon: I think the management of one's equity is one of the most misunderstood subjects around. I hope we have all learned our lesson that equity should be guarded with your life. You never know when economic conditions will cause it to evaporate.

This is such a sad story. Every foreclosure sign makes me sad for the people who are losing their houses and angry all at the same time that we're picking up the pieces.

Janet,

You're a great writer and great communicator. A truly saddening story - one we're seeing way too often. Homeowners that want to save their homes or come out of it with the least amount of bruises as possible need to start doing their research on the programs that are/will/may be implemented and made available by Congress. As you may know, here are a few:

Zach: Thank you for that compliment. And thank you for these resources. I will be certain to review these for anything I might use to help this client, or future clients.

Wendy: And I hate how we in the real estate industry are guilty by association. I wonder what is is we should have done? Warning clients did not diminish the overwhelming desire to make money and own real estate.

Janet,

Great job and I'll be tuning in to see the take/attitude Good Morning America has on the subject.

Janet,

That's amazing! Once again, you have the power to captivate audiences.

Someone may come forward to bail this guy out of his misery. You never know..

I feel sorry for him. I can't believe he banked the house on his relationship. That is never good. I wish him the best of luck and I am sure he knows he's not alone!

FEB

2008

Janet,

Great read albeit sad story.

Thanks for sharing,

Audrey

Janet

What most people do not have empathy for and really should is the horrific stress falling behind on bills creates. The collection company calls, the unrelenting pressure, the hopelessness of it all. Everyone at some point in their lives makes a decision they will later regret. House, spouse, or carreer path. Your client is trying his best and unfortunately it is not good enough. It is a tough lesson to learn in life. I hope he comes through it despite all the pressure to try and pay the bills. So many people are struggling terribly in this economy. Good people.

What would be even sadder is if some entity bailed him out and nobody learned their lesson and this problem repeats itself sometime in the future. Now that would be really sad!

Janet, hopefully this story will serve as a guide and warning to others through the fact that it will be shared with a wider audience. What Jake is going through is an unfortunate reality for so many today.

FEB

2008

Great Post ! Keep up the good job.

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