LOS ANGELES, January 30, 2012―We Americans must stop lying to ourselves. We must sit down and talk about releasing our homes to foreclosure, thus releasing the stress and anguish we suffer when burdened with mortgages we cannot pay for homes we could never afford.
The homes in question are those sold to millions of Americans at inflated prices. These are homes the buyers could never afford, but they were told that due to increasing housing prices, these homes would create a positive equity flow, ensuring homeowners’ ability to continue to own the home or to sell at a profit.
Not honestly facing the fact that they cannot afford these homes, nor even the dream of owning them, is forcing thousands of Americans to live confined in their “upside down home for free.” They have to distance the emotional foreclosure from the business foreclosure.
The contracts lenders wrote between 2000 and 2008, offering zero-money-down incentives or ridiculously low percentage rates, were often deceptive. In their zeal to buy the American dream of home ownership, buyers never looked at the future terms of these loans for their eventual impact. They only wanted the home.
“Emotional foreclosure” has cost the American economy dearly as people are afraid to lose what they should not have been allowed to buy in the first place. The destruction will not stop until the emotions are removed from the decision-making.
Recently, presidential candidate Mitt Romney remarked, “Don’t try to stop the foreclosure process. Let it run its course and hit the bottom.” Mitt Romney is completely right. People need to understand, even if made to understand the hard way: The Emotional Foreclosure Era is over.
People can no longer aspire to loans without having employment. They can no longer afford to delude themselves with tricky loan terms, hoping and wishing against reality to refinance two to five years later. Bitterness towards the banks, of the “gangstas,” as Ms. Waters calls them, is counterproductive.
The banks did not cause the problem. False precepts, personal dishonesty, the belief that we are all entitled to the American Dream, and emotional foreclosure―those are the causes of the problem.
Emotional foreclosure means not looking at reality. It is believing that high unemployment is not an issue, not seeing that families across the country owe banks $50,000 to $400,000 plus the home’s loan value.
As Ms. Waters demands, the banks may issue a modification to your loan, but they will not readjust the value of the home to the current market value. This only delays the inevitable mess that emotional foreclosure makes worse, rather than putting the emotional baggage aside and simply letting the home go.
Letting go of our emotions in a foreclosure can be daunting. RealtyTrac, the leading online marketplace for foreclosure properties, recently released its “U.S. Foreclosure Market Report” for August 2011. The report shows foreclosure filings — default notices, scheduled auctions ,and bank repossessions — were reported on 228,098 U.S. properties in August, 2011.
The good news is this was a seven percent increase from the previous month. The bad news is this was still down nearly 33 percent from August 2010. The report also shows that one in every 570 U.S. housing units included a foreclosure filed during the month. RealtyTrac continues by stating that With-The-Default notices (NOD, LIS) were filed for the first time on 78,880 properties in August, 2011, a nine-month high, and a 33% increase from the month before.
That marks the biggest month-to-month increase since August of 2007.
Furthermore, default notices increased over forty percent, on a month-to-month basis, in several states, including New Jersey (down 42%), Indiana (46%), and California (55%). However, all of those numbers are down from a year before in those states. Overall, default notices are down 18% from August, 2010, as well as 44% below the monthly peak of 142,064 default notices in April, 2009.
These numbers show neither optimism nor pessimism—but realism. Emotional foreclosure has been fueled by too much of the first two. We need more of the third one realism.
Some politicians provide their constituents with false hope by preaching a message rooted in the gospel of emotional foreclosure. U.S. Congresswoman Maxine Waters (D-Ca.) is just one politician who seems to ride on people’s emotions when making statements such as:
“It’s up to the federal government to make sure people can afford their mortgages. So much so that it’s time the president bring the gangsters in, put them around the table, and let them know that if they don’t come up with loan modifications and keep people in their homes, that they’ve worked so hard for, we’re gonna tax them out of business.”
This only slows the foreclosure process. Americans must learn to get their emotions under control, accept responsibility and not believe the lie that the government has this under control.
Check the experts, and you will see the honesty. Christopher Thornberg, with Principal Beacon Economics, said that the revisions made to GDP by the Bureau of Economic Analysis threw him off:
“Revisions to the economy that came out in July surprised me and a lot of folks. It’s hard to get ahead of the Bureau of Economic Analysis when they change history on you,” he said. “It didn’t change the overall size of the recovery, but it made 2010 better and 2011 worse with the (second-quarter) GDP numbers. Not being privy to BEA methodology it’s hard to see what’s coming down the pike.”
“The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems,” said James Saccacio, chief executive officer of RealtyTrac. “It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.”
Foreclosure auctions, Notice of Trustee Sale, and Notice (Judgment) of Foreclosure Sale (NTS and NFS) were scheduled for 84,405 U.S. properties in August, a decrease of one percent from the previous month and a decrease of 43 percent from August 2010. Foreclosure auctions hit a 37-month low in August and were 47 percent below the monthly peak of 158,105 scheduled auctions in March 2010.
Despite the nationwide decrease, scheduled auctions were up substantially from the previous month in several states where the auction notice is the first public notice in the foreclosure process: Oregon (19 percent), Arizona (20 percent), Georgia (22 percent) and Colorado (51 percent). Scheduled auctions were still down from a year ago in all of those states.
This is why former Massachusetts Governor Mitt Romney is right and Rep. Maxine Waters is wrong. Business and math, not the emotion of foreclosure syndrome that is raging across America, should drive your decision.
When a homeowner is unable to maintain the home’s cost, why remain in the home? Sentimental reasons are not good reasons.
The truth is in black and white: the days of seeing your home owned free and clear are long gone. Americans look to their homes as a source of income; free equity, to take and replace at any time as long as there is the value in the home.
However, with reverse mortgages and constant refinancing, the reality is that we no longer work toward owning our home, that chapter of the American dream of homeownership has closed. Instead home mortgaging has created an emotional roller coaster that is toying playing with your economic security.
The goal is no longer to own the home and burn the debt papers, but to use one property to create a larger debt in another.
The truth can hurt, but the truth also creates freedom. There are more foreclosures coming down the pipeline as loan modifications are not working and the job market continues to depress. Homebuyers are realizing that their home equity is never coming back.
Instead of finding a way to meet the mortgage responsibility, selling, or allowing the property to foreclose, they seek government bailouts. This is both foolish and dead wrong.
Freedom lies in what Romney said in October of 2011: “Allow investors to buy homes put renters in them fix the homes up and let it turn around and come back up. … The Obama administration has slow walked the foreclosure process … that has long existed and as a result we still have a foreclosure overhang.”
This is a real world solution, not emotional foreclosure.
As a licensed realtor, one would never recommend anyone to walk-away from his or her home. However with unemployment at an all-time high, with homes across the country at $50,000 to $400,000 above the loan value of what is owned, with no way to know if the banks are being truthful, with the anguish and the stress, it truly is not worth it.
So what are you American people waiting for? Listen to what Romney says, let the emotional foreclosed home go freeing you of the hurt and emotional lies the banks have keep repeating.
Home values are decreasing on a daily basis; surrendering a home means little when there is a better home around the corner in the same neighborhood - at half the cost. Realize that home ownership is not personal; it is merely a contract between buyer and lender, not an emotional marriage between two parties.
Homes are things, not persons; things that with hard work can be regained in due time—especially in the 2012 market.
It is time to let go of emotional foreclosure.
“And be not conformed to this world: but be you transformed by the renewing of your mind, that you may prove what is that good, and acceptable, and perfect, will of God”. Romans 12:2
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