Absolutely nothing could have been done prior to distress and foreclosure! But moreover, how the hell does this borrower have the ability to re-purchase any home at any price immediately following a foreclosure after squatting in it, payment-free? Because of our insane, state-financed, self-contradicting mortgage system.
I can get a 3%-down FHA loan, take a loss, stop paying my mortgage for a while, transfer my loss as well as lost payments to the lender, and (if you get your way) re-purchase the home without ever having to so much as move my stuff out of the place.
In the end, I’m glad we have Libertarians
Yes, I’ve disagree with them on a lot of things. But when it comes to blowing the whistle on the abuse of power by public entities or assaults on civil liberties, the libertarians are willing to cross the aisle and do the right thing.
Today is one of those
That’s not at all how it went down. (For anybody who missed my earlier post, I’m hoping you can all help me get a Freddie Mac policy changed.)
In this case, you can actually piece a pretty good narrative together from press accounts and public records. The house was purchased in 2003. Bank of America1 appears to have given and then refinanced a string of mortgages on the property adding thousands of dollars in fees each time to culminate in 2007 mortgage for over twice what the home was sold for in 2003. Each of these transactions would have added a few thousand dollars to the mortgage. Most likely that final mortgage relied on a highly dubious appraisal.
The economy crashed. (Not this homeowner’s fault. But maybe a bit the fault of the various mortgage holders here). In 2009 the homeowners had their hours at work cut. Fortunately, a national program to help people like these borrowers was put in place. They applied. They were told they qualified. They were told to start making lower payments. They did. Please keep in mind that at this point the mortgage was current. Of course something could have been done prior to the foreclosure. The borrowers did what they were supposed to do. But then ….
Bank of America asked for some paperwork for their own underwriting. They sent it. In my experience many of the lenders (including Bank of America) routinely lost or misplaced these documents. (Fifty attorney generals and $26,000,000,000 says I’m not just making that part up.) Bank of America asked for more paperwork a few times and either lost or ignored it each time. In July 2011, Bank of America started rejecting their payments.
So when you say that the homeowners were “squatting rent free,” you mean “Bank of America refused to accept their money and backed out of a modification it initiated because it couldn’t figure out how to sort out the documents that came out of its fax machine.” So how can the borrowers afford to re-purchase their home? They can afford it the same way they could afford to make the payments.
Is our mortgage system insane? Clearly. But why should we have policies that cost even more public money for the sole purpose of making an example of people who did everything they were supposed to?
Edit: And yes. You’re right that homelessness is a broad problem and involves a lot of people in significantly worse hardship than the person who just lost a home to foreclosure. And I’m sure that living on the streets in, say, Calcutta is even harder than living under a bridge in Western Massachusetts. But none of this is relevant. This is a case where we’ve got somebody living in a home that they owned and can afford to pay for and a policy designed to make an example of that person as part of a misguided social experiment. “Some people have it even harder” isn’t a reason not to change a dumb policy.