I am always telling people to leave your judgment regarding foreclosures at home. I live by the mantra that people need to take care of themselves and make decisions concerning their housing situation that are best from them. Some will modify, others will short sell and some will walk away. Even though I truly believe this to be true I still catch myself on occasion passing judgment based on a quick overview of the facts. Working in the foreclosure industry it is easy to take a look at a transaction history and immediately profile the reason for the foreclosure. (This is probably what is wrong with our government and their reaction to the housing crisis but that is a story for another day.) I wanted to share with you one such incident that was a wake up call for me.
A house is my community is now bank owned. I had watched the children that lived there grow into adults. I read in the newspaper that the father had died in 2009. Shortly thereafter the property went into default. When I looked at the transaction history I was surprised to learn that they were the original owners of the property (purchased in 1979 for approximately $40k). It appeared that they had been relatively responsible with their equity until 2007 when, like many homeowners in foreclosure today, they took out a loan for $544,000. This was the loan that was now in foreclosure.
Clearly, I thought, another example of using your home as an ATM. The problems appeared to start when the father died and the mom and the children could not afford the payments. This family was losing a home they had owned for over 30 years because they were irresponsible with their equity. Not judging, just profiling right?
Fast forward 8 months and the property goes back to the bank at trustee sale. I watch the family slowly move and when it is finally listed for $230k I took a tour like all of the other neighbors. The family was clearly angry when they left. There was foul language spray painted on the walls and the appliances were gone. The house looked like a 70’s time capsule and I quickly made note that not a single dime of the $544k went into improvements. More Judgment.
So I decided to write a blog about this family as a typical foreclosure story in America. I researched a bit further and purchased a copy of the foreclosing Deed of Trust and other documents available through public record data. What unraveled was a punch to the stomach.
In 2007 that loan for $544k (in the fathers name only) was a reverse mortgage. That was the maximum amount of the loan not what was actually owed. When the father died and the mothers name was not on the loan there was an acceleration clause that made the loan due and payable. They couldn’t just start making payments, the lender wanted the whole amount. It appears that the family could not qualify for a refi, maybe they did not have enough income, most likely the house would not appraise high enough to get a new loan. After all, they owed $240k on a property worth $230k.
The truth is that this family lost their father and because of some loan terms they probably didn’t really understand they also lost their family home.
It makes me so sad that this happened right under my nose. Had I not been so quick to prejudge/profile their situation could I have possibly helped them with foreclosure prevention information? Sure does seem like something could have been done. This is one of those cases where you stand up and fight, you call the evening news, you write to your elected officials.
Profiling may be effective for solving crimes but when it comes to foreclosures I think I am going to take my own advice. There is no room for judgment when talking about foreclosures.