Virginia.  I believe it is.  The agreement signed by most credit card holders discloses that the providers share information and can pull your credit report regularly.  When their computer reviews your recent history and sees one card at 100%, they can raise your rate on their card. 

I read the new credit card regs coming down in about 18 months and this isn't changed.  Just that they have to notice the consumer before the rate goes up and they can't charge the higher rate on existing balances.

We're doomed.

Mr. Archambault, Jr. Darling. 

Why is it that so many feel they are entitled to the bank's money? If they had the success and appreciation they had planned on did they intend to share the gains?

BANK'S MONEY??  SINCE WHEN??  Seems to me that there is about $350,000,000,000 in the banks' reserves that is permitting banks to grow, yet these same banks are forcing consumers to ruin their credit rating for years to come to satisfy an arbitrary requirement that the bank will look at a short sale application only when the borrower is in default.   A requirement, by the way, that changes the short sale transaction not one cent, but guarantees that the consumer will suffer from a lower credit standing for many years. 

Does it enhance the banks balance sheet to force a mortgagor to default before qualifying for a short sale?  NO!  This is simply a Draconian requirement that the banks dictate in addition to other Draconion requirements.

Does their loss automatically entitle them to our stockholders equity?

Does anyone seriously believe that the banks who cooperate with short sales have not figured out a way to turn this loss into a gain either through a tax advantage, loss carry forward, or even, another tax payer contribution to the banks' balance sheet through another infusion of the remaining $350,000,000,000 of TARP money.

Banks will accept short sales when it is in their best interest. When in their opinion a short sale will stop a larger loss. Short sales with honorable home owners who can afford to continue meeting their obligations to us become gifts. Nothing in the banks chatter or tax status provides for benevolent giving of stock holders equity. Short sales not only take the bank's money, but also devalue all their other security in the area.

The borrower who qualifies for a short sale by documented financial statement and hardship should qualify for a short sale without the added punishment and future loss of credit.  Forcing a default and late payments on a credit report/history does nothing to improve the banks balance sheet or their stockholders' equity.

"WHY DO BANKS REQUIRE THAT A HOME OWNER BE IN ARREARS BEFORE SHORT SALE APPROVALS?"

Ask yourself: " Why would banks accept a short sale on a good loan?"

Why not?  If the borrower can document the need and the only alternative is foreclosure, why would a bank not process the short sale on the record rather than requiring that the destruction of the borrowers credit be a part of qualifying? 

Do not confuse short sales with the losses incurred on REO's. REO's involve rules and regulations requiring lenders to divest themselves from non-operating properties as soon as possable.

The banks' definition of "as soon as possible" is quite different from mine. 

REO's are not offered at a loss by choice, but losses are tolerated to comply with their charters. 

And if the banks would process short sales in a more efficient timeline and with stremlined qualification similar to a borrower qualifying for a loan, they would have far fewer foreclosures to dispose.

Czarina Lenn.

Matthew. 

Lenn: I have to disagree with you here - on economic and moral principles.

I hesitate to respond because you have made an argument "on moral principles" about a matter of civil contracts and not religious matters.  Once we begin to make moral arguments, it depends on whose morals will rule, which necessarily leads to which religion determines what is "moral" in this matter or that. 

Mortgage companies are not in the business of trying to ruin consumer's credit. They are in the business of making money. That's how they pay THEIR employees who then pay THEIR mortgages and send their kids to school, eat, retire, etc.

I agree that banks are not in the business of trying to ruin cnsumer's credit, which begs the question of why are they doing just that with the short sale requirement that the consumer ruin their credit to simply apply for a short sale approval.  Once the consumer has ruined their credit and the bank does NOT approva a short sale application, the consumer is screwed whether the house goes to short sale or not. 

The banks have a moral right to be repaid the amount they lent out, with interest. They acted in a fully legal manner and no force was used to coerce the buyers into entering into the debt. It was a fully disclosed, mutually beneficial contract when the borrower took the loan, so why is it suddenly a conspiracy or wrong for the banks expect to get paid back?

Again, that "moral right."  As a matter of civil contract law, the bank is entitled to be repaid.  Agreed. 

If you want to see all lending stop in America, start robbing banks of their interest due with government forced write-downs and write-offs. Banks can make money in LOTS of industries. They'll just stop lending to housing, and focus on foreign ventures, tech, phara or other industries where the borrowers actually pay them back.

Seems to me that many already have, unless they can immediately sell the loan to the now public owned Fannie Mae.

Those consumers who are losing their homes today because they cannot afford them are doing so for two reasons: 1. They spent more than they could afford; took a gamble; and lost and... 2. The government destroyed the currency with inflation. Don't blame the lenders/banks - they're losing just as much on the destroyed currency and loss of repaid loans as the consumers.

There are millions of consumers who are attempting a short sale who are in a negative equity position through no fault of their own.  If, through family emergency, job loss, illness or other reason, the home owner must divest themselves of a property, with negative equity, they cannot sell and short sale is their only option before foreclosure.  These consumers should not have the added burden of the loss of credit. 

It is the government's job to protect the rights of the banks, the bank employees, the bank shareholders, just as much as any other citizen. Why should we expect Government to harm banks with intrusive acts??

And the government has done a masterful job of protecting the banks.  First through the infusion of about $350,000,000,000 of tax payers money and then through the SNL imitation on Capital Hill with Congressional representatives protecting banks with softball questions about the mortgage meltdown and tax payer losses through MBSs and other fig newtons of the investment banks imagination. 

It never ceases to amaze me that it's common to think of lenders/banks as "them"... Them who? They employ Americans, invest in America, make American borrowing possible. It's not consumers "versus" them. They have the same rights to have their contracts enforced as anyone else. And they should never be sacrificed for the sake on another "interest group" called "consumers." Once we accept that principle, then anyone can be sacrificied in the future - just depends upon whose gang is in power that day.

If the consumer's "them" is the banks, the banks' "them" is the surely the consumer.

Sorry - this is a really bad idea to me...

Best wishes for 2009 ! (And best wishes to the banks, too!) 

You too Matthew and thanks for stopping by.

JoAnna.  Isn't it though? 

George.  MY HERO!  What a wonderful idea.  I've been advocating for that for months. 

Jeff.  You are absolutely right.  Insurance companies now routinely require credit reports in addition to C.L.U.E. reports before writing policies. 

Jason.  Wouldn't it be nice to have someone in a position of policy who really understood housing??  Not necessarily me, but there are many who could serve well.   The political hacks that control the housing industry in the government have other interests, their contributor constituancies.

Paul.  Indeed!  You understand perfectly how the system works.

Svetlana.  I believe in the conspriacy of Fannie, Congress, et al. totally.  You are right on target.  In many ways, the credit scoring system has made pauper level borrowers of many folks who have never been nor will they ever be late with any payment. 

Camille.  Ah ha!  Another conspiracy.  The new Secretary of Education designate is a crony of Mr. Obama.  This is going to be interesting. 

Barb.  It just defies logic.

Kris.  Same thing.  One of my sons was repremanded by the high school he attended for tardiness one week.  We had to meet with the counselor and he had to agree to a list of items before we could leave.  One of the items was that he "not smoke on school grounds".  Good grief, the child didn't smoke. 

Terry.  I'm quite sure they will. 

Jim L.  I agree completely.  However, I don't believe the bank is mitigating their loss on a short sale by requiring the borrower be in default.

Kristin.  I'm not sure the short sale was meant for investor loans, but I know that many have done so successfully.

Tim.  I don't believe that pitting one consumer against another deminishes the seriousness of ruining anyone's credit as a requirement for short sale.  That borrower who used his capital for something other than down payment has already paid the penalty through a higher interest rate on his mortgage loan.  The short sale should be the same for each and it should be based on hardship which can be documented.  Ruining the credit of an applicant is an unnecessary and Draconian penalty.

Brendan.  I agree completely.  The requirement that the consumer be in arrears is punitive and it is even prior to receiving the hardship package.

Emily.  Thank you for stopping by and commenting.  I can do nothing but agree.

Mark.  I disagree.  It is the negative equity that is keeping our "move-up" buyers out of the market.  It's also making foreclosures and short sales the only thing that buyers can buy and it makes many uneasy.  With mortgage write-downs our market could resume normal sales, the banks wouldn't have the leverage they do and all of those home owners who are in a negative equity situation would again become home buyers because they could sell rather than wait for foreclosure.

Midori.  Your brother is representative of millions of home owners who can't sell. 

Chuck.  That's funny.  Of course, we already have that.  It's called the Option ARM.  Words beautifully in an appreciating market.

Teri.  Thanks.  This is really fun and a good mental exercise.

Jim L.  Indeed.  By forcing the default, if they then deny the hardship package, they know that they can force a foreclosure because the loan may have already have been accelerated. 

I wonder how many of the FHA insured borrowers have availed themselves of the HUD forebearance process.  That option, if accepted, can give a defaulting home owner about 2 years of rent free living.   Mmmmmmm.  Maybe someone should write about that.  It's not widespread knowledge.

Ann.  Thanks.  I adopted that family image as example of the families who are being harmed by the banks/government/Wall Street, et tal.

Audrey.  Read the guidelines for the government loan modification and you'll see that they require that the home owner be in arrears, could be 3 months, before applying.

Rebecca.  Great minds (yours and mine) are working alike.

Don.  I wish they'd teach simple budgeting in public schools.

Bill G.  Several of our Short Sale clients have had to rent before sending in their hardship package because they knew that once they were in arrears, it would show up on the credit report and they'd have a harder time renting.

James.  Your is the prevailing thought.

Craig.  If you're not in real trouble before calling the bank, you will be shortly thereafter.

Mike.  The forces for higher and higher consumer credit costs are overwhelming.  The cost of money and competition once determined interest rates.  Interest rates are now credit score driven whatever lowers credit scores drives the consumer costs up.

Susan.  Shhhhhh..

Cindy.  The insidious thing about requiring that the consumer be in arrears is that it has to be BEFORE sending the hardship package.  If the hardship package is rejected or no offers accepted, the consumer has ruined their credit without need.

Gail.  Good for you.  You've outed one of the perps.

Larry.  Perhaps it was.  That is in the government FHA restructuring too.

Caren.  I'm fine with that, if they play fair.  I don't believe that the short sale guidelines, if there are any are often fair to buyers, sellers and agents.

Konnie.  That presupposes that the law-makers care.  Unless our petition was accompanies by a maximum legal contribution to their coffers, they wouldn't entertain it.

Carolyn.  Thank you, thank you.

Matthew.  We can agree to disagree.  I'll advocate for the consumer and you can advocate for the banks.  Perhaps one day the TARP money will run out and the banks will again need the consumer. 

BTW, my tongue was securely in my cheek when I wrote this post, as you noticed.

Craig.  Gee!  That's what I thought.

Mark.  I understand everything you say.  However, I believe the negative equity is one of the most serious problems in the housing market. 

Of course, not everyone needs to "move up".  However, the inability of that consumer block is causing serious harm to the overall housing market, which, as I've said before fuels our economy. 

We have been in a bad position for about 3 years now.  I probably should have said "move up or out, or away".   Military home owners are not voluntary movers.  Civilian job transfer opportunities are lost when a home can't be sold and many civilian job relocations are not voluntary. 

Families have children and need more space.  If a family needs to take an older family member in, they could have a real need to move up to a larger home. 

There are many reasons why folks need to sell.  There are millions who cannot. 

If writing down all the negative loans in the country were only to cost $1,000,000,000,000, that would be the best stimulous our economy could ever get and save the financial life of many American families.

Not such a terrible goal.

Bill.  Happy New Year to you too.  It's going to be interesting.

Toula.  Thanks.  Wouldn't it be fun to put some common sense in the government?

Allen.  Agreed.  The banks have a "loss mitigation" department. 

Who's going to mitigate the loss for the consumer??

Mark.  Thanks.  I was missing a few 000s for a Trillion, which I believe would be worth the money.

Bryant.  I agree completely.  I'm not seeking blame either, simply suggestion courses of action, ideas, rational thoughts and

COMMON SENSE.

Don.  You are so right and I am very concerned about all of the consumers who are going to be crippled with loss of credit for years. 

I don't believe that the government even took that into consideration when they designed the laughable programs for loan modification. 

I know the banks don't care.

Thanks Tracy.  I try hard to keep everyone on their toes. 

Keeps our minds off the news.

Lisa.  Thanks.  The government buffoons would have to first disclose every dime they've ever accepted from a bank or Wall Street entitiy that profitted from MBSs.

Roland.  I don't know how good the info is, but it surely is fun.

Carol.  It already has.  It goes ever upward.  Time was when FICO wasn't supposed to be considered for FHA.  No more.  This, of course, with "risk based pricing" for FHA has cost many consumers a lot of money.  The rates quoted for loans is quite often a myth.  Many mortgage companies are masters at bait and switch.  They quote an interest rate/pts and then come back with, "Oh, you only have a 730 credit score, your rate will be XXXX.

Sheree.  Indeed.  The requirement that the consumer be in default before the bank will consider short sale presupposes that they WILL.  When, in fact, they may NOT.  Then what is the consumer to do when not only can they pay payments, their loan may have accelerated and their credit is ruined.

As you say, "if they qualify for short sale, they qualify for short sale" whether they are in arrears or not. 

Marian.  I believe that the only "squeeky wheel" the law makers listen to is the one greesed with cash.

Lane.  I understand that my theory is a bit of a stretch.  However, the arrears requirement is so wrongheaded and non-sensible that something, even far-fetched, must be behind it. 

Elizabeth.  My solution is to simply invest a $Trillion Dollars or so in the American home owner and write down all the mortgage balances to assessed value or appraised value.  However, the moralists want the American consumer punished for buying a house when the "experts" said it would be a great investment.  The "experts" don't get punished for profitting from their perfidy, but the American consumer surely is being punished for following the advice of the "experts".

Amy.  You wrote:  "And many, many of those owners attempted to sell their homes prior to requesting a short sale from their lenders.  To me, this shows good faith that they tried to pay off their obligations rather than just walk away from them.  Doesn't that count for something???"

I've looked at hundreds of listings for short sales and, you are correct, they have been listed for long periods of time, unsuccessfully.  They will NOT sell because they would have to sell for far above MARKET VALUE.  Further, if they did get a contract, they wouldn't appraise.  The only thing in my area that will appraise is short sales or foreclosures.  Or, of course, the occassional property that was oned for many years and the owners have sufficient positive equity to sell. 

Missy.  You wrote:  "I have NOT met one person in a short sale or foreclosure that did not have a hardship for needing to sell."

Well, that debunks the critics that want to blame and punish the American home owner for the mortgage mess.  Of course, you are correct.  Sure, I've spoken with a few who called to just dump a property through short sale, but if they can't show a hardship, it's not going to happen.

The credit standards have already been changed.  When a home owner comes to us for help with a short sale, if we can see the hardship, mortgage situation that makes them a viable short sale candidate, the first advice is to rent now, before the bank forces them to ruin their credit by being in default.  That one requirement contributes not one scintilla of value to the entire short sale transaction. 

Thomas.  I agree that there is bloodshed.  I simply wish to prevent one small stab wound, the added wound of mortgage arrears to qualify for short sale. 

The banks wounds have been treated with about $350,000,000,000 and more to come.  The American consumer is still bleeding profusely.  They are treated with negative equity and the insult of no credit for many, many years. 

I'm not talking about credit for purchasing consumer items.  You can hardly exist in our economy without reasonable credit.  Simple auto insurance is going to cost much more for consumers with low credit scores. 

Linda.  Wouldn't that be fun.  However, I would not put up with a confirmation hearing whereby the pontification of Senators would have to approve.  I'd want an appointment whereby the Senators didn't have the opportunity to pontificate.

Alice.  Many of the loans defaulting today were 80/20s.  HOWEVER, even if the buyer put down 20%, they are still in a negative situation. 

Of course, the 80/20s were invented by THE MORTAGE INDUSTRY.

Larry.  Thanks for your comments.

You wrote:  "Oddly enough, there is still a residential real estate market. Certainly not as large a market as 2 years ago, and the market prices are much reduced, but a market never the less.  There will be less Realtors selling less homes to a smaller market, but we will get through this difficult time as we have others."

I don't believe that we have a "market".  We have some sales, but the numbers are too erratic to be considered a market.  Of course the "trends" that would evident a "market" is down, but I won't consider it a real estate market until the millions of home owners who are trapped in their homes without the possibility to see and participate in a "real estate market" can do so at will. 

Dawn.  You are correct.  It is the banks that have the power.  The consumer does not and the government is on the side of the banks, not the American consumer.

The consumer simply, I believe, is doing little to nothing.  At least they're not shopping as much as the government wants them to.  That's our one small way of saying, "I don't like what you did and I'm not cooperating with your plan any longer". 

If the government wanted to fix the economy, they'd think about the consumer befor the banks.

The government failed.  The government failed massively.  The public will not forget this mess.  Every consumer who was wiped out financially and there are millions of them, will remember.  They are helpless and they know it, but they will not forget.

Tim, Tim, Tim.  That started back in Bill Clinton's days when he opened the doors to more immigration for middle east and other countries.  All an immigrant has to do to be able to buy a home is have a job and don't break the law.

Immigration from South America has fueled housing in my area for years.  The average LEGAL immigrant from South America buys their first home after about 7 years in America.  They often buy entry level homes and help that market remain viable. 

Few homes would have been built in my area over the past 5 years without the work forces from South America who are the primary rough carpenters, concrete suppliers, etc.  South American immigrants have open businesses that service the home builders across America.  The honest hard working legal immigrant will never be neglected in the United States of America. 

Judi.  Your sold ratio is probably not much different from many areas.  Homes just sit and sit and sit.  Agents do what they can do, but the market is NOT viable.

The "credit" I'm referring to that is being unnecessarily harmed by mortgage company is ALL credit, not just credit to obtain a mortgage loan.  With unnecessary late mortgage payments on their credit report, consumers are going to be paying much more for any kind of credit.

Best Spot.  Nothing is changing yet.  Perhaps as more homes go to foreclosure, banks will rethink their short sale policies.

Gail.  If she has the income to make payments, chapter 13 would help.  Often just getting rid of the consumer debt and keep the mortgage is a solution.  However, if she can't show feasibility, chapter 13 isn't going to help either. 

Maggie. 

By George, I think she's got it!!

Maggie.  That's really the bottom line isn't it.  Follow the money.

Perrin.  Why is it we say "enough is enough" only when it gets to help for the American home owner.  The government is still dolling out about a $Trillion Dollars a week of taxpayer money to the banks and now the investors. 

If a person qualifies for hardship for a short sale with arrears, they will qualify without arrears.  If the banks won't approve hardship without the owner in arrears, where is the credit relief for the home owner if they let current mortgage go to arrears, apply for hardship short sale and are rejected.  Since neither agents nor home owners are privy to bank processes in short sale matters, why is the home owner the only one losing??????

You appear to presume that only fraudulent mortgages are going to short sale.  Not so.  Every short sale I've been involved with through listing or selling has been caused by post-purchase events that led to the hardship. 

Paul.  The only thing worse than the unfortunate home owners who find themselves upside down on their mortgage and can't make the payments is the vultures swarming around them.

Faina.  There are no guidelines for short sales, although I've heard that Fannie is thinking of getting into that arena.

If a bank will not look at a hardship file until the owner is 3 months behind, they are forcing the owner to default leaving the owner with the two choices of short sale or foreclosure. 

If the bank requires arrears, they should review and approve or disapprove a property for short sale before backing the home owner into a corner. 

A home owner is a clear case for short sale whether or not they are current with their loan.  Ruining their credit isn't necessary to the short sale process.