Christian Science Monitor:
What’s next for Occupy Wall Street? Activists target foreclosure crisis.
The Occupy Wall Street movement, which cut its teeth last fall by occupying streets and parks across the country, is moving into a new phase as it gears up for spring: occupying homes.
The movement that claimed to speak for “the 99 percent” and made income inequality part of the national discussion now is organizing protests at housing auctions to support those affected by the foreclosure crisis.
“At first, we were occupying parks, then homes,” says Sofia Teona, an organizer with Occupy Atlanta, of the movement’s evolution. “We are starting locally, but it’s a national movement.”
On Thursday, dozens were arrested when a group in New York interrupted a foreclosure auction in a courtroom, and Occupy organizers say more events are planned nationally in coming weeks.
According to Michael Premo, an organizer for “Occupy Our Homes” in New York, the movement has carried out 50 similar actions nationally in the past month, including foreclosure disruptions, eviction defense actions, and home re-occupations.
This article was offered in a comment thread at JWS as proof of what wonderful things OWS was doing. In a fairy tale world where everything is black and white it would be. The problem is the real world is a bit more nuanced.
Here is an example given in the story:
Another case in Atlanta illustrates both the wrenching nature, and the complexity, of the foreclosure process.
The Pittman family thought they were going to inherit the house that their grandmother had lived in since 1953. Instead, they are now occupying it.
Eloise Pittman’s house in Atlanta was foreclosed on early last fall, but her family didn’t find out until shortly before she died in November.
In 2006, Pittman, a retired school secretary whose only source of income was her retirement checks, refinanced her house and got a loan of $300,000, according to her granddaughter. Pittman couldn’t keep up with the high payments and she avoided telling her family.
For the past 51 days, the Pittman family and members of the Occupy Atlanta movement have camped in a tent outside the house and stayed in the house to protest what they call Chase’s policy of predatory lending.
A spokesman for Chase has a different story, saying the bank did not originate the loan.
“We worked with Ms. Eloise Pittman in 2009 to modify her loan, and when her payments stopped in mid-2010, the foreclosure process started,” says Greg Hassell, a spokesman for Chase. According to Mr. Hassell, Chase is offering to let the family buy the house back for the market rate.
According to the Pittmans, the bank offered the family two options. Either they pay $100,000 to keep the house, or else accept $2,500 to leave.
They are choosing a third option – joining Occupy Atlanta to march to the bank to demand the deed back.
“We are going to march to Chase to demand that they give back the deed,” says Carmen Pittman, Eloise Pittman’s granddaughter. “We won’t stop fighting until justice is served.”
A sad story that tugs at the heartstrings, isn’t it? But I have a few questions.
Why did Ms. Pittman borrow the money? Was it a home improvement loan? Where did the money go? What kind of loan was it? Was it a re-fi or a second mortgage? Why did she default?
How much is the home worth right now? How much is still owed? Is there any specific allegations of fraud or wrong-doing by the bank or loan originator?
Think about this – if she owed $300,000 on the home and the bank is willing to let the family take it for only $100,000, that doesn’t sound like they are trying to rip anyone off. Even if Ms. Pittman bought the house brand new in 1953 it’s now almost 60 years old.
Let’s back up a little bit.
Owning your own home has always been part of the American Dream. Once upon a time 3 and 5 year mortgages were commonplace. 15 and 20 year mortgages were the result of the New Deal:
In 1934 the federal banking system was restructured. The National Housing Act of 1934 was passed and the Federal Housing Administration was created. Its intent was to regulate the rate of interest and the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly debt service payments on a mortgage, thereby also increasing the size of the market for single-family homes.
FDR believed that encouraging private home ownership was good public policy. Later the tax code was modified to provide a mortgage interest deduction. Land was fairly cheap and construction costs low, making it relatively easy for most Americans to become homeowners.
At first the idea was simple – buy a home when you were fairly young, pay it off before you retire, and then you would only need to worry about taxes and upkeep in your golden years. (Back then property taxes were fairly low.)
Somewhere in the Fifties people started thinking about “starter homes” and “keeping up with the Jones.” But the basic idea didn’t change much – buy a first home, later move to a bigger home, pay it off and stay there until you die.
I should stop here and point out that you don’t really own a home until you finish paying for it. The bank owns it until you retire the mortgage. Oh, they are nice enough to let you live in it (and they expect you to take good care of it) but until they give you back the deed of trust you signed it’s THEIR house.
This semantic difference causes problems for some people. But in the inflationary Sixties and Seventies it wasn’t a regular problem. If you managed to make your house payments for a few years you would see your fixed house payment become relatively cheaper as your pay went up each year. You might even be paying less to buy your house than your neighbors were paying in rent.
If you ever looked at the chart for an amortized loan you will see that the interest payments are front-loaded. That means for the first 10 years of a 20 year loan you are paying off more interest than principle. If the value of your home doesn’t decline the reduction in principle is one way to build equity. Equity is the portion of the home’s value that YOU own.
But there is another way to build equity. During the Sixties and Seventies real estate began to rapidly increase in value. My mom bought her house in 1973 for just under $20,000. Within a year or two it had increased 25% in value. By 1980 it had tripled. Assuming she didn’t refinance she would have still owed most of the original $20,000 but would have accumulated $40,000 in equity.
This is when real estate began to change from a place to live to a financial investment. I first heard about “leveraging” in the late Seventies. That is the idea of borrowing against your equity and using the money to buy additional homes as rental properties.
This was when the real estate bubble began to inflate. It popped in 2008 and property values dropped dramatically for the first time since . . . ever. Here where I live was one of the hardest hit areas.
All around me there are empty homes. Most weren’t evicted. People simply walked away from mortgages that were twice or more the value of the property. Some homes are just sitting there because the banks don’t want to foreclose. There are tens of thousands of people in this area who are underwater in their mortgages but are holding on, making the monthly payments and hoping the values will recover soon.
Nobody likes to hear about someone else losing their home. I used to work for a company that did evictions, and it wasn’t a fun job. In the fairy tale version of events it’s the evil, greedy, heartless Mister Potter versus George Bailey.
Here’s the problem. Banks are not inherently evil.
Yep, I said it.
I’m not saying there are no greedy bankers or that they are all without sin. I still don’t understand why none of them went to jail after the Wall Street meltdown. Well, I understand why, I just can’t believe they actually got away with it.
Banks are businesses. They provide a useful and necessary function in our society. But they are amoral – they exist to produce profits, not fluffy bunnies. They need to be watched and regulated, but they need to be allowed to make a profit too.
If it wasn’t for banks, most people would never be able to buy a home in the first place. So the bank lets you borrow $100,000 to buy a house, and in return you agree to repay the loan with interest. And to guarantee that you will repay them you pledge the property as security with a deed of trust. There are all kinds of laws and regulations controlling everything.
If you repay the loan on time, no problemo. In fact, that’s what the bank wants you to do. If you default they are very probably going to lose money.
If they wanted the house they would have simply bought it in the first place instead of loaning you the money to buy it. If they foreclose on it they will eventually sell it. They don’t want rental properties, but if they did there are plenty of others available.
Right now they will probably lose money on the sale because most foreclosed homes are worth less than what is owed on them. If you owe $100,000 and the house sells for $50,000, they lose $50,000. The bank can get a deficiency judgment for the difference, but they’re unlikely to collect on it, at least not anytime soon. They will also lose all the attorney’s fees and realtor costs incurred in the foreclosure and sale.
But let’s say your house is worth more than you owe. If they foreclose and sell your property for $200,000 what happens to the money left over after they pay off your loan? They have to give it to YOU (minus costs and fees).
I always ask why the mortgage is in default. Usually it has something to do with someone losing their job, or as the result of a death, disability or divorce. They took out the mortgage with the best of intentions but later on shit happened.
What is the bank supposed to do when someone quits paying their mortgage?
Go back up to the story of Ms. Pittman. She took out a loan in 2006. Apparently Chase later bought the loan from another bank. In 2009 Chase worked with Ms. Pittman to modify the loan. In 2010 she quit making payments. It wasn’t until the fall of 2011 that Chase finally foreclosed. That doesn’t sound like a bank that is acting outrageously.
I supported Hillary Clinton’s 2008 proposal for a new Home Owners’ Loan Corporation (HOLC) to help homeowners refinance their mortgages. Even without HOLC some homeowners can avoid foreclosure with the help of other government programs and/or bankruptcy court.
But the fact is some people don’t deserve help. Others need assistance with refinancing or extensions of time in order to get their shit together. But some people for various reasons will never be able to pay off their mortgages. No matter what we do they will lose their homes.
The bottom line is we can’t just tell the banks to fuck off. If we put a stop to all foreclosures the banks would stop making loans. They would have little or no choice.
So what is OWS doing to help?
Are they championing new legislation like HOLC?
Nope.
Are they raising money to give homeowners advice and assistance in refinancing or other options? What about financial or relocation assistance?
Nope, nope and nope.
They are trying to disrupt legal proceedings and “occupy” foreclosed upon properties much like they tried to occupy public spaces. It worked so well last time.
I know I’m committing heresy, but reality is more nuanced and complex than depicted by OWS members.
Filed under: Economy, Housing Bubble, OWS Tagged: | #OWS, Financial Meltdown, Housing Bubble
I can remember just a couple of years ago friends bragging that their homes were a goldmine. They borrowed money on them and bought other properties so that they would also escalate in value and provide a bonanza of gold. The problem was that those fiends had modest homes and kept insisting that they were worth a small fortune ( one saying her home was worth a half million dollars). That kind of escalation was not sustainable when people’s income did not keep up with those values. I knew it was gonna collapse and couldn’t believe they were able to keep borrowing of those unpaid for homes. Thats where the banks schemed to defraud people. They had to know those values were unsustainable also. They just loaned the money and waited for the default. I think they had no idea how many people would default at the same time.
See… this is where I disagree… Why would the bank ‘scheme to defraud people’ that couldn’t pay off a mortgage on an overpriced home that will certainly lose everyone involved money?
I think the bank has employees who were told to go write mortgages (and the federal government insisted/assisted) so they did.
From what I understand, because the mortgages were being derivatized and sold on the stock market as the new hot thing, banks and brokers had an incentive to create loans regardless of whether they got paid back.
At least until the bubble popped.
Believe that’s right votermom. The lending banks bundled and sold off most of the mortgages (turbo charged by fannie and freddie in many cases) to the secondary markets where institutional investors hedged their bad bets with all kinds of financial insurance and also as it turns out expectations of government and/or federal reserve bailouts. In a way you could say that our fed-diluted tax dollars are bailing out our 401Ks and pensions which invested in our over-leveraged mortgages in the first place.
Why would banks do this? Well, they securitized the loans and got the rating agencies to rate those securities as AAA. They then sold those securities to pension plans. Myiq is making the quaint assumption that the bank is actually holding the loan. They’re not – they’re “servicing” it (which means they get paid even if the loan forecloses and the investors who bought the packaged mortgage securities lose everything).
The banks had no incentive to perform due diligence on the loans, since they managed (with the cooperation of the ratings agencies) to foist all the risk onto someone else.
Good points. If you look at “It’s a Wonderful Life,” you see that George Bailey actually had the better business model. Potter had a low opinion of most people and used the bank to buy rental properties and charge high rents. Getting a mortgage with his bank would be almost impossible if you didn’t own something valuable already. Bailey put the Building and Loan’s assets into homes for people and offered them low rates so they could afford to move out of Potter’s slums and build equity. There’s a short scene where one of Potter’s employees says that he may end up working for Bailey the way he was able to move people out of Potter’s bank.
The irony is that George Baily would be the one in trouble with the government now. The bank’s money was in homes and not financial products, They call that being overextended,
You know what would really help people be able to pay for their mortgages? Jobs.
Obama just gave yet another speech about helping people to refinance and save all this money. That’s great, but it doesn’t much matter how low your payments are if you don’t have a job.
The other problem is that it’s hard to “refinance” a mortgage when you’re underwater and you have a 40 or 50 year mortgage. The only way to stay in that home would be to pay rent and forfeit your house upon your death. Sounds like Obama’s plan. It also sounds like Potterville.
And that is part of the reason why we are in a deflationary cycle in real estate. But there are other reasons also. The bigger is always better society advertising PR crap is another. The only homes that are selling rapidly in my area are 1500 sq ft or less! The 3500 to 5000 sq ft monsters are sitting there. When people bought these enormous homes they did not think of how much work they are to clean and maintain, heat and cool, and insure and furnish. Of my social and work group that built custom homes in the mid 80′s we were made sport of because we built a “little” 2200 sq ft house. We paid it off with a 15 year loan in nine years and we are the ONLY ones still in our house. We built it to live in not as an investment.
A typical home in 1930 was 2 bdrm, 1 bath with no garage.
In 1960 it was 3 bdrm 2 bath with a 2 car garage.
In 1990 it was 5 bdrm 3 bath with a 1 and a 2 car garage.
and by 1990, most families were inhabited by two parents and 2.4 kids. Earlier, there were more kids and some extended family.
As families got smaller houses got bigger.
honk
The problem with trying to figure out the point of OWS is every time you think, well maybe they want to help with this problem or that problem, maybe they want to help people with this trouble or that trouble, it never ends up being that. They’re not really there to change anything or help anyone. They’re doing things for themselves. For their “movement”. Maybe for their long term plan (in the more naive embers heads) of gathering enough steam to start a revolution.
The problem is OWS does things for OWS. For their egos. For their own gratification. For a gold star from the unnamed, unseen, invisible hand of the teacher. And of course that can mean only one thing, they’re being steered by the real leaders and organizers, some up front, some behind the scenes, to keep them occupied.
In the end Occupy exists solely for the purpose of keeping the members occupied.
“Just wait”™
Exactly. Just wait. The members of occupy, the ones being occupied, are to keep waiting. That’s the point. Don’t really do anything. Don’t really change anything. Just sit here, make some noise, and wait. Good dogie.
Whip kisser!
it is to get bo reelected.
They are using tactics that will only (at best) delay the inevitable.
Disrupting court proceedings might buy a couple days. Then what?
“So sorry for burning up your due diligence with our dog and pony show. And how dare you not give us your stuff since you no longer have a house to store it in.”
the other side
the tea party long game
http://biggovernment.com/kschlichter/2012/02/04/political-moneyball-the-conservative-strategy-for-winning-the-fight-thats-coming-after-the-election/#more-419812
This may seem off subject but as a bar owner in a blue collar place it happens a lot that people are out drinking and run out of money. I never run a tab but I have often taken a 20 out of my pocket and said pay me when you can. 90% are back to me within a week but there is always that 10% that will be at the bar down the street spending money avoiding me because they claim they cannot pay me back. The price of doing business. I get loyalty for fronting 90% but I have to accept that 10% is going to screw me. They are not f*cking over a business they are screwing me as it comes out of my pocket. I see the OWS student loan crowd in the same vein.
Think of it as paying $20 to get rid of them.
Sadly it is never those people that I would pay to stay away who run out of money. always the person digging for change
I never understood the idea that you could move into a home (renting or buying) and then stop paying the rent/mortgage but expect to stay there anyway. The same with not making a car payment.
Try skipping out on any contract agreeing to pay for any item or service.
For instance, at a veterinary hospital, we will work with you even if all you can pay is $5/month. If you miss 6 payments, off to civil court where we’ll get a judgment to garnish your wages. Worse case, a sheriff’s auction of your personal property. You agreed to that when you signed the consent form to provide services to your pet, you promised to pay us for those services. Vets have to pay their bills too.
labor picture
people working longer because they can not retire
fewer jobs for the younger worker
http://pjmedia.com/vodkapundit/2012/02/03/your-friday-morning-dose-of-doom-gloom-3/
Some don’t deserve help. The thesis is sound.
The folks on the right live by it.
Macroeconomically, it’s the foundation of the worldwide austerity movement.
A friend who used to sell shoes went into the loan game back in the heyday; he offered me a liars loan; it sounded kinda good but I decided against it at the time.
I have a degree in Business Adm. With a concentration in accounting.
Maybe that made me an atypical prospect.
The friend sells used cars now. What does it all mean?
As Peewee Herman said; “I don’t know!”
Food for thought though…
“…these loans were designed to fail”
http://www.nytimes.com/2007/11/25/business/25gret.html?pagewanted=all
“It appears that many millions of mortgages lack a chain of ownership sufficient to establish who actually owns the note. It appears that in many cases, this deficiency has been made up illegally, with forged, falsely notarized, or otherwise irregular documents. It appears that more than 60 million mortgages are registered in an electronic system that has subverted the legal recording of property deeds and liens…”
James K. Galbraith
Professor of Economics, University of Texas
OCTOBER 18, 2010
http://economy.nationaljournal.com/2010/10/perspective-on-the-foreclosure.php#1671250
We need to learn to embrace and respect native risk again. For decades the investment and shadow banking system has promoted limited liability, financial insurance, engineered hedges, government backstops, and what do have to show for it – runaway moral hazard and reckless investment bahavior. The banks are not to blame for the whole mess, but they certainly profited from the bad behavior for decades and they created the environment in which bad behavior would thrive and multiply. – until it was no longer sustainable.
Riots in Greece. Austerity…Coming to a Theatre Near You »
http://www.planbeconomics.com/2011/10/26/riots-in-greece-austerity-coming-to-a-theatre-near-you/
“Theater” as in:
European Theatre of World War II -
http://en.wikipedia.org/wiki/European_Theatre_of_World_War_II
This sounds like Lambert:
But it’s not.
I like this part:
Now, I disagree to some extent, because the whole POINT of govt and taxes is to be coercive for the greater good. I don’t have a big problem with that when it’s within reason. But when the dudes with poll-science degrees, the apparatchiks running the process, are the ones getting fat and happy and skimming more and more – then I have a problem. When the apparatus of govt with all its myriad hangers-on becomes the lion’s share of where the money is going, rather than merely an efficient framework for distributing it where it’s needed, then we have a problem.
And that’s what has happened. The system itself is sucking up the cash, and becoming more and more draconian and demanding “for the greater good”, when really it’s to feed the apparatus more than anything else.
In short, I don’t want a privileged political class as my lord and master, any more than I want robber baron industrialists as my lord and master. And I’m sick to death of both parties offering me only those two choices.
My theory is that government originated after the agricultural revolution. As permanent settlements became necessary because of farming, some of the biggest and strongest men were made into warriors to protect the cities. Before long the protectors became rulers.
War lords
I for one welcome our new overlord… overlords.
“…because the whole POINT of govt and taxes is to be coercive for the greater good..”
Yes, but what’s become of that? It seems like people just pay more and more taxes and nothing ever trickles down for the greater good anymore.
Locally we just shot down a vote on the library and fire dept levies. We’re still awaiting the results on the school levies. People love all these things, but they’ve watched our taxes get higher and higher and the money never being used for what they say.
When the apparatus of govt with all its myriad hangers-on becomes the lion’s share of where the money is going, rather than merely an efficient framework for distributing it where it’s needed, then we have a problem.
Honk!!!!
Honk!
As always it’s the financial industry getting fat and happy, much more than government bureaucrats. Though there’s always a relationship of course.
DITTO~~~
yes, the agricultural revolution, which began in Mesopotamia, allowed for division of labor. Govt. was needed to administer it all because then a few could feed many and grain could be stored and saved for bad years. I guess you could say that govt. began to administer resources. Good point.
It really took the Industrial Revolution to change the dynamic of food and labor. Even 100 years ago, the majority of people in this country were farmers.
LMAO. WOW
Not a very good joke teller though. A commenter did it better with: One is a practicing polygamist…. and the other is a mormon.
Picking my blog teeth tonight with controversial conservative artists
http://bloghopenchangery.com/2012/02/04/the-forgotten-man-by-jon-mcnaughton/
Oh wait….he’s right
Just switched to Fox to get NV results, and theres Meryl Streep on Huckabee. Oy.
zing
A retired school secretary could not have legitimately qualitifed for a $300,000 loan. I, too, wonder what happened to the money but the fact is that the bank is responsible for making loans that can be repaid. During the subprime mortgage frenzy, there were numerous crooked mortgage lenders who took advantage of unsophisticated customers.
It is not necessarily true that a retired school secretary could not have legitimately qualified for a $300,000 loan on a house — we have no idea about her finances, her credit, the value of her home nor the value of her other assets. A statement like that completely unfounded on any evidence doesn’t help anything nor does it PROVE anything. I could just as easily say that a retired school secretary could not have legitimately believed she’d be able to pay back a $300,000 loan. You can’t prove me wrong on that one, either, but it would be just as baseless of an assumption as yours that she couldn’t have legitimately qualified for the loan.
But yes, there are a lot of crooked mortgage lenders who took advantage of unsophisticated customers — I know this because, as I wrote on JWS site (but got out of there because the stupid from the OWS defenders was burning me), I work daily fighting mortgage companies in COURT to help people stay in their homes. I do this using the law degree I got with student loans that I do NOT expect the government pay back for me.
And while I’m sad that the idiots defending OWS over at JWS’s place actually think this story “proves” that OWS is “helping” people keep their homes (it isn’t — if they actually wanted to help, as I wrote at JWS’s place, they can volunteer at my office — I’ve got plenty of work), I’m happy that the courts aren’t going to put up with their shit like the Obama administration and various state governors have been.
angie, kudos to you for your work in actually helping people keep their homes.
OWS is just exploiting the issue for publicity.
Thanks votermom — I’m not doing it for praise — I’m choosing to do it because I think it is the right thing to do, despite the fact that the area of law I’ve chosen to practice in isn’t anywhere near as profitable as others, but you have to enjoy what you do. And trust me, I enjoy helping people stand up to the mortgage companies, lenders, etc. I feel I’m actually helping them & all of my clients are grateful to have someone with compassion helping them after dealing with the assholes at the banks on their own.
But it ticks me off that now OWS has “decided” that they are the ones “helping” people keep their homes when they haven’t done shit, aren’t going to do shit & are, as you rightly put it, exploiting the issue for publicity.
I wish I lived near you, angienc, because I’d volunteer at your office in a minute. I’ve got good skills, three crappy part time jobs, and I’m bored to tears. I’ve been doing some work with seniors, helping them get property tax exemptions, pointing them in the right direction for refinancing.
One family in my neighborhood with five kids lived in a crappy double wide that was falling apart and they could not afford it any longer, so foreclosure was the only option. It’s kind of funny because they moved up the street into one of our vacant Mcmansions and the rent is lower than their house payment was. It’s funny because the kids think they won the darn lottery, when what they really did was allow foreclosure to happen and the unintended consequence was that it improved their quality of life. They now have a hot tub and every kid has their own bedroom.
People have a lot of shame about financial failures and not being able to live up to their obligations. I just wish everybody could have some faith and realize that there can be a light at the end of the tunnel (and it’s not a train coming at them.)
Thanks yttik! LOL — I wish you lived closer too.
This is so true:
99% of my clients walk into my office as a last resort & they are full of shame & a feeling of powerlessness — that’s where I really think I help them, not only helping them see they don’t need to be ashamed as the same thing is happening to others just like them all over the country, but in showing them options to get out. Just knowing their real options & having a concrete plan does a lot to relieve their anxiety. It isn’t that my clients are stupid, but they are uniformed about how the legal system works & what valid options exist to help them.
Also, you’ve pointed out an important fact — sometimes, depending on the circumstances, it is better to just let go of the property & move on. Say someone bought a house with no money down & has been living there for 3 years & loses their job. Well, without current employment, no equity in the house (because of the market) such that they are upside down by thousands & thousands on the mortgage & no upfront money put into it (the monthly note can be written off as “rent” that they would have been paying to live there anyway), sometimes it is the best option to file a Ch. 7 & start fresh. Other times, of course, for a variety of circumstances, it is better to try to keep the house. It all depends on the individual situation though. That is why I initially wrote you can’t draw conclusions based on information in a news story. I do a thorough exam of all of my client’s financials that led up to the crisis they are in now & I lay out all of their options going forward, giving them the truth about the pros & cons of each course of action. Just knowing there are concrete courses of actions they can take & the consequences of each is immensely helpful to them because it puts the power back into their hands to determine their fate, regardless of how they decide to proceed (to walk away from or keep the house).
As an aside, I really do wish my clients would come to me before they’ve already drained their 401(k)s & retirement accounts trying to dig themselves out of the financial hole without legal help, because I could have helped them AND they could have kept their 401(k) (which are exempt from bankruptcy).
So, 2 pieces of advice I can share with you all: (1) never touch your retirement accounts to pay off debt; and (2) never make unsecured debt secured debt.