Housing Crisis: "My Son Was Not So Lucky"

The Morgan-Stanley Building

Morgan-Stanley freezing the home-equity credit lines on mortgage holders
By Diane Stirling-Stevens / The Rag Blog / August 9, 2008

I’m certain other institutions will follow their lead; this article probably doesn’t surprise most of us.

For me, I was glad/am glad I’ve seemed to have a ‘nose’ for these potential down-turns, and after having our property appraise 4X more than what we paid for it; keeping a very low mortgage balance, in August of 2007 we asked for a one-time equity loan to pay off our existing credit cards. What was funny was the loan officer who approved this loan said, “You’re asking way too little when you consider the finance charges on this loan; why don’t you triple your request.” Aha, that was a clue to ‘just say no’!!!!

At the time, I thought possibly those officers might be getting a commission based on the SIZE of the equity-loan, and have no idea if there were those kinds of incentives as it seemed loans were being written at such a fast and furious pace.

Now, based on the down-turn, our property has been reduced by 18% in just ONE YEAR. The only good thing for us, was we had a sizeable ‘cushion’ based on the original purchase price, and after adding the equity loan, we can still take a substantial ‘hit’/reduction, and still not owe MORE than the appraised value. Since this is our retirement home, we won’t be putting it on the market, so that gives us a certain comfort because when we die whatever the value is then, should be more than any remaining mortgage on the home (at least our kids should get a few dollars from the inheritance).

My son was not so lucky; he bought his home February 2008 – it’s dropped so sharply, that he’s lost $180,000 these past 6 months in the ‘appraised value’. There’s no way he can afford to sell the place; he can’t afford to pay off what would be a mortgage (plus closing costs and fees) of $200,000 in one LUMP SUM payment. So, he’s stuck – and for how many years???? The sad thing was I suggested they hold off a bit; that I didn’t think the housing market was going to do anything but collapse because of the many loans being written – the adjustable rates scared me, and I knew they wanted to potentially relocate in 2009 after his wife finished getting her doctorate degree. It bothers me because my son felt I was being too cautious; he claims I’m so conservative when it comes to money, and now he’s so sorry he didn’t listen.

Possibly if you’ve got any children or young people who are not aware that they might not be able to draw against any equity line of credit they might have received from their bank, this article should be read and shared.

This whole mortgage issue has certainly saddened me, because all my life it was considered a safe thing to invest in – your home. Real estate usually increased in value over time; it was something a person could rely on, and the equity loans or home-improvement loans used to be viable. Now it seems our children and our grand-kids are going to end up paying RENT; cramming themselves into shared housing, and it makes me sick to think about it.

Morgan Stanley Said to Freeze Home-Equity Credit Withdrawals
By Christine Harper / August 7, 2008

Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won’t be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.

Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn’t public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.

Wall Street firms including Morgan Stanley are ratcheting back on risks after the collapse of the subprime mortgage market and ensuing credit contraction saddled banks and brokerages with almost $500 billion of writedowns and losses. Consumers fell behind on home-equity credit lines at the fastest pace in two decades in the first quarter, the American Bankers Association reported last month.

Source / InfoWars

And then there’s this:

Carolyn Patmon met with Florida Governor Charlie Crist

Joining The Corporate Bail-Out Receiving Line
By Carolyn Patmon / August 9, 2008

I’m changing my name to Fannie Mack.

I figure when the federal government is handing out all those billions to Freddie Mac and Fannie Mae to solve the mortgage crisis, I’ll just slide in line and get a few dollars for my own mortgage crisis. Luckily for me, my maiden name is Mack, and my grandmother’s name was Fannie, so the paperwork should be easy.

That’s about the only way that I — or any other victim of predatory lenders — can expect to get much public aid. Since my home went into foreclosure, I’ve been helped by ACORN, I’ve been helped by my family and friends, but I haven’t been helped by the government yet.

I appreciate the president for signing the “American Housing Rescue and Foreclosure Prevention Act” into law last week. It’s better than nothing.

But I learned from my experience with a deceptive lender to always read the fine print. And the fine print of this bill sounds more like an “American Corporate Rescue Act” for Freddie Mac and Fannie Mae than much help for an ordinary homeowner like me. You can bet Congress didn’t make the CEO of Freddie Mac give up any of his almost $20 million in pay as part of this $300 billion sweet deal.

For us, of course, there are strings attached. If you’ve already gotten a 60-day notice, tough luck for you, because the refinancing program doesn’t start until Oct. 1. You’ll have to pay a fee to refinance. Lenders don’t have to agree to easier terms. Many won’t qualify because their incomes are too low or their debt is too high.

Of the million homeowners foreclosed on last year, or the 2 million expected to face foreclosure by the end of the year, this program will only help 400,000 at best. And I bet a lot of those 400,000 still won’t be able to afford their so-called re-financed loans.

Sometimes I blame myself and think I should have been smart enough to avoid IndyMac’s slick marketing. But state and federal regulators should have been smart enough to see the subprime crash coming and smart enough to put regulations in place to stop it. Like how about a rule that bank robbers and embezzlers can’t be mortgage brokers? ACORN and other community groups saw the crisis coming as early as 2002.

We didn’t make those banks and mortgage companies cook their books, or hire felons, or hand out mortgages like church bulletins to everyone who walked through the door. In fact, for years ACORN has been doing everything in its power to stop predatory lending. Last week hundreds of us rallied at National City Bank offices in 30 cities and persuaded the company to negotiate their loan practices- good news for future borrowers, but little help for those who have already lost their homes.

The federal government continues to bail out industry after industry, but the buck always stops with the taxpayer who ends up footing the bill for every corporate crash. Our country is like a dysfunctional family with one spoiled kid rescued every time he messes up and the other given tough love even without doing anything wrong.

So I’m changing my name to Mrs. Fannie Mack.

As Tom Paxton said in his 1980 song about the infamous Chrysler bailout: “I’m changing my name to Chrysler. When they hand a million grand out; I’ll be standing with my hand out; Yes sir, I’ll get mine.”

[Carolyn Patmon is the head of Anti-Foreclosure Committee for Orlando ACORN and a family delegate for the Equal Voice for America’s Families Campaign of the Marguerite Casey Foundation.]

Source / Z-Net

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4 Responses to Housing Crisis: "My Son Was Not So Lucky"

  1. Maybe some of us will just go for Freddie-the-Freeloader; or Fannie-Pack!

  2. Well I got my music to play, but I’ve had nothing but @$@#$@#$ trying to post my thanks to you for such incredible diligence, and reporting! Diane

  3. Anonymous says:

    Please ask our leaders that if a bail out of Fannie Mae and Freddie Mac is really necessary, then why can’t it be in the form of a loan from the taxpayers (i.e. government money). When an average taxpayer gets in over his or her head financially his or her only option is to borrow the money, often times from these very same institutions at a high interest rate and bail themselves out. Why should it be any different here? I understand the argument that if we don’t bail out these agencies or banks like Bear Sterns their will be worse reprecussions in the country’s overall economy. Well, if that is the truth and only the experts know if in fact that is the case, then why the free ride? President Bush said wallstreet got drunk, a reference to how much money was made at the expense of the average citizen. Well it is time for them and all other big business to sober up!!!! Don’t throw away my money!!! If you need to use it to bail out financial institutions fine. I will agree to a reasonable interest rate.

  4. Wow – didn’t know I gave you my last name, but I see you’ve been kind enough to put me as the ‘by-line’ on this updated entry.

    I just read the post by anonymous, and it struck me that if they keep using the tax-payer’s money to ‘bail out’ these problems, it would seem they’re using OUR money without paying interest, right?

    I think we should all be given INCOME TAX EXEMPTION STATUS for the amount they grab from us all (smile). Aha, but of course that won’t work, since it’s our payroll TAXES that are paying for this mess.

    Okay, so argue that one through and say this: #1 – It’s the rich people that BUY stuff, so how about making anything that isn’t deemed a necessity in life (food, clothing, housing) exempt from any LUXURY TAX, but sock it to those who buy items that definitely fall into the category of ‘luxury’.

    If a person has MORE than one car, that added vehicle is charged a one-time TAX/FEE since it’s going to add wear and tear to our roads/highways. If the person is married; has a spouse, and the spouse is employed full time, then that car is appropriated as a ‘business/work vehicle’. This car would be exempt from any fee.

    When kids think they have to have cars, sock the parents hard for adding that 3, 4, or whatever added vehicle is within that family.

    Simply put: 2-car family/2-working adults = exempt. More than that? All under the same roof? Hit them; help them get their ‘greed’ under control through luxury taxation.

    Granted, this isn’t going to put as much toward this huge mess we’re faced with, but it might generate a few dollars.

    Create a FAT TAX – if you’re going to burden the Medicare/Medicaid system with your excess weight that drives up the cost of insurance for the entire nation, then your butt (and boob) are in the wringer for NOT being eligible for FULL COVERAGE. This is not a direct ‘tax’, it just makes those individuals cough up DOLLARS to supplement their medical needs, rather than making the nation’s working community pay for it!

    They say Medicare/Medicaid and the prescription drug program is going to cost SIX TIMES what the social security program has burdened us with, so make these people offset these costs by paying for it out of their pocketbooks!

    Anyone who’s 15 pounds, or more, overweight – PAYS! A sliding scale; hard and fast – imposed ASAP, and at least some of those obese people will start losing some weight, and when they do that, they won’t have a myriad of illnesses related to being obese – thus, less visits to the doctors/hospitals/and to the drug stores for pills!

    For those who live in houses that are over a million dollars in appraised value, DOUBLE THE PROPERTY TAXES for each and every $500,000 that the property appraises to. Will it drive down these inflated appraisals? I don’t know, but again, it will make people opt for a home that isn’t bordering on castle-quality!

    When we, as a nation of adults, can’t reign in our excessive demands, then create conditions that force us to become more moderate and prudent in our life-style.

    We are a nation of negative savers – once it was emphasized that 10 to 20% of your take-home pay, should go into savings. Now that has completely gone by the way-side!

    We’ve had presidents suggest putting money into the stock market as a form of saving – in lieu of the social security system. What a bunch of crock that is – talk about a topsy-turvey future!

    We once invested in America with savings bonds – we’d do well to consider that as part of our savings program.

    We need to save; we need to become less demanding, we need to be considerate of our surroundings – our planet that tries to support the demanding civilization.

    We need to TAX all electronic ‘goodies’ – not just with a sales tax, but with a TECHNOLOGY TAX, and maybe the family with 5 cellular phone; I-pods, and other ‘gizmos’, will think twice about adding non-essential items to their household.

    The cosmetic industry is completely nuts! Slap some taxes on certain products that simply are ridiculous and expensive.

    To me, I think I could easily work up a myriad of taxes that would be called the ‘NONSENSE’ tax. Yes, this is being pretty dictatorial, and sounds truly radical, but I’ve been witness to my own grown children’s waste; my mother lives in $1,000/month – one of my sons spends that much just on getting his dog groomed and cared for/walked daily!!! I can’t stand to see this disparity.

    No doubt I’ll be labeled a communist by making some of these remarks, but I think of myself as a humanist.

    Most people hold regard for established churches. Those churches have rummage sales; they take up collections to help some of their members in time of need, and they have community suppers where all eat and contribute to that fine meal.

    I think of these acts of goodness; sharing – caring, and think of my Amish friends….they must be laughing at a good majority of our citizens, as they’ve chosen an austere life-style, and have benefited from doing so.

    Religious books make suggestions for living in a manner that is also prudent and worthwhile – possibly more of us will return to some of those principles; either by choice, or by force – forced to when we can no longer live (as my mom would say) ‘high on the hog’.

    Sorry – long comment, I see.

    I’m glad to hear you’ve got some new readers, and I hope they’ll also join in the commentary. Diane

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