The end-unit house in my row is in foreclosure, again. This is the third time owners have moved out of that house since I moved into the neighborhood a little more than four years ago. This time, however, it’s a little bit different if not downright ironic.
The owner who was foreclosed upon this time had lost her job about a year ago, not too long after she bought the house. She had worked at Fannie Mae. Her former employer had backed the mortgage on her house, but when she tried to rework her payment terms after going into default (because she lost her job), Fannie Mae refused to work with her. Of course, when Fannie Mae got in trouble the government helped them out, but that principle doesn’t apply to little people.
In a final insult, my former neighbor got a new job not too long after she started missing payments, but that wasn’t enough to let her keep her house. Even with evidence of employment, Fannie Mae foreclosed on her. And now, the house at the end of my row is growing weeds in the flowerbeds and has paint cans in trash bags lined up on the porch. (Update) – As of this afternoon, there was a crew cleaning the house and wedding its yard, hired by the bank’s realtor.What happens in the mortgage business is simply crazy. Remember Wells Fargo suing itself to recover money from itself? This stuff is still happening. In spite of government programs that try to help, people aren’t getting help. Our housing finance system is still a mess, and there is only one candidate for Congress talking about it, Jeff Barnett.
With one of five mortgages “underwater,” tens of thousands of our neighbors live in constant fear of losing everything. They are one bad break — sickness, job loss — away from going bankrupt. They lose their home and their life savings.
I will champion three immediate steps to help homeowners:
- Institutionalize the short-sale process so homeowners can force a short-sale when their bank refuses to modify an underwater mortgage.
- Guarantee an FHA loan two years after the short sale – so homeowners with good credit can recover.
- Give homeowners the same bankruptcy protections we give big corporations.
None of these proposals should cost the federal government a penny. They won’t weaken the financial system – banks have already written off underwater mortgages. Our government must help middle class homeowners caught up in the housing bubble. We cannot forget the Too-Small-To-Save.
This is a problem that isn’t going away. Jeff Barnett knows that there is a lot of work still to be done.
[Update] Following on Doorbellqueen’s comment, here’s an idea from a couple years ago that would definitely solve these problems, but it got nowhere: Own To Rent.
Here’s how the plan works. Currently, if a homeowner is not able to make their mortgage payments, the holder of the mortgage can go to court to place the house in foreclosure. At that point, if the homeowner is not able to come up with back payments on the mortgage, or work out an acceptable arrangement with the mortgage holder, the bank or financial institution that holds the mortgage retakes ownership of the house and can have the homeowner evicted.
Under this security of housing proposal, the foreclosure process would be changed so that the current homeowner would have the option to remain in their house as a renter paying the fair market rent. If a homeowner chose to go this route, the judge in the foreclosure proceeding would appoint an independent appraiser to determine the fair market rent for the house. This is similar to the process a bank undertakes when it hires an appraiser to determine the value of the house before issuing a mortgage, except the appraiser will be asked to determine the rent rather than the sale price. – Dean Baker, TPM Cafe