Leaving the Coccoon

Still waiting. There’s nothing quite like rushing to meet a deadline when you don’t know what the deadline is. It’s not the end of the world or anything, just that moving can be stressful. In fact, moving is considered one of the most stressful life events. More stressful than that is losing a home to foreclosure, on some scales.

But, really, why does putting our stuff in boxes and turning our lives upside down for a few weeks create so much stress? For most people, they already know where they are moving to. I have no idea yet where I’ll wind up. However, every other time I’ve moved has been stressful, even when I’ve been excited about moving.

Moving out of a space you’ve created for yourself and your loved ones changes just about everything. You are not just changing locations.  You’re also changing an aspect of your identity – what neighborhood you identify with. You’re changing your routine. You’re changing your view. You’re creating a new home. You’re changing.

Unlike other stressful life events, such as marriage, the birth of a child, the loss of a loved one, there are no social ceremonies that mark the passage from one home to another.¹ In all these other events, your friends and community members rally around you, lending you support, celebrating your new identity, but this is not true of moving so much.

So, moving is a stressful life event. Combine that with the high stress event of foreclosure, then add in being sued (eviction), starting a lawsuit, or adding to your family unit (moving in with relatives). The more major stress events you have going on in your life, the more likely you are to sustain a stress-related illness. There is a laundry list of stress-related illness, but some of the most serious are the higher likelihoods of developing high blood pressure, heart disease, heart attack, and stroke. Anyone who has been through any of these events, I’m sure, can relate.

So many people, including myself, have a tendency to define themselves partly by their home. Some of the most common questions when getting to know someone are: 1) What do you do? and 2) Where do you live? Our society often appraises people based on these two questions, especially since it is socially unacceptable to ask what political party or religion one belongs to.

Yes, I’m proud of the house I once owned. I love the home I have created. I love having a pool to have summer pool parties in. I love having a fireplace to gather around in the wintertime. I love being within two miles of most of the shopping I need to do. But these things don’t and shouldn’t define me as a person. Or you.

Once you’ve created a home, it is cozy and comfortable. It becomes your cocoon. Whereas you may not have control over the décor at your work, you do at home. Whereas you may not be able to get other drivers to drive the way you think they should, you have more influence over whether or not the kids get to run in circles around the sofa in the family room. Whereas you can’t get rid of the garden gnomes in your neighbor’s yard, you can create your yard however you want. We create these spaces to be comforting, safe, and beautiful. And it is scary to leave them.

Here, I feel, is the essence of many people’s reluctance to move after foreclosure, the logic behind digging in and entrenching themselves until the last moment – the reason many foreclosed homeowners find themselves on the hamster wheel.

It’s a scary world out there.

Once you know that it is possible to lose your job and to lose your home, nothing in life seems very certain any longer. We’ve all been raised with the belief that if you work hard, you keep your job for a long time, and that you should follow the American dream of owning your own home.

When you’ve done all that, and you lose it all, it’s hard to know where to begin again. What is your new belief system? Do you keep repeating the cycle of the old belief system? What norms do we now choose to define ourselves as “successful”? You know the possibility exists that the same thing could happen again. Most of us don’t want to create the situation that allows for that possibility. It feels like it’s safer to stay where you are then to tempt fate by getting excited about starting all over, only to lose it all again.

As for me, I am going to take a leap of faith and move at least two hours away from where I live now. It’s not like moving to completely foreign territory, but it is someplace I’ve never lived before. How do I decide which city or town in all of Los Angeles and Orange counties to pick to live in? Will I still be close to shopping? Will I like my neighbors? Can I handle more traffic? Will it be easier to find a desirable job? Can I afford to rent a place the same size as where I’m used to living? Will I be able to afford a home there, eventually?

I don’t have the answers to any of those questions yet. What I have finally realized after having been entrenched in a home that doesn’t legally belong to me any longer, struggling to find even temporary work, is that this isn’t working for me. My safe place no longer feels cozy. The place that is supposed to nurture me has bound and gagged me. It has become a restrictive cocoon, and I’m ready to burst out of it and spread my wings.

Anything is possible.

 

¹ Making the Big Move: How to Transform Relocation into a Creative Life Transition, Cathy Goodwin, Ph.D. (New Harbinger Publications, 1999).

 

 

Riding the Hamster Wheel

I received some very supportive comments in response to my post last week. Thank you! Reading support from people who have been living with foreclosure like me lets me know that other people out there think as I do. While reading the comments, thoughts started swirling in my head – although I do not do financial modeling, I have heard of game theory, and I am wondering if there has been anything studied or written recently applying game theory to individual foreclosed homeowner’s decision processes. Sure, this is really, really analytical. But I can’t help but wonder if there was some sort of “map” people could look at to see what their best options are, the agony of making a decision could be lessened.

One of my readers brought up the term “hamster wheel”, and, certainly, this is an apt term for the situation many foreclosed and about-to-be foreclosed homeowners find themselves in. Trying to make the decision whether to stay or go is very much like running on a circular wheel and going nowhere, despite the illusion that if you just run fast enough, you might get somewhere else.

Even our own attorneys aren’t always the best resource for advice either, because their goal is usually to keep homeowners in their homes. Also, many of the lawsuits arising from the market collapse are still being decided. Laws have changed in the interim that have rendered some of the earliest charges entered against mortgage companies obsolete. So, no one knows what the best course of action is. This brings the first spin on the hamster wheel back around to – you as a foreclosed or almost-foreclosed homeowner must decide what is the best course of action for you.

Due to my experience, it is surprising to do a web search with the question “Why do banks prefer to foreclose?” and get back a bunch of articles in which the authors assert that banks prefer to do short sales than to foreclose. My perception may be skewed because my lender wrongfully foreclosed on me, I believe because at the time they foreclosed, my home was worth slightly more than what I owed on it, and they foreclosed without giving any notice.

I asked this question because I hear it from so many people. It is incredibly frustrating, is it not, to read the news, listen to the news, and watch all the “Bank Owned” signs dug into your neighbor’s yards, which all create the picture that banks are foreclosing in record numbers. In talking with your friends on the topic, I’m sure you’ll find that they know someone, or of someone who tried to modify their loan and weren’t able to, so went into foreclosure.

One of my closest friends saw the writing on the wall, and a year before she knew she wouldn’t be able to maintain her payments, put her place up for sale. When she couldn’t sell it after 6 months on the market and the value had dropped, she put it up for short sale. The bank refused offer after offer for a year. The last offer was the best offer – $26,000 over value, $20,000 less than the amount owed. She wound up walking away, the property went into foreclosure, and the bank wound up selling the property a year later for $90,000 less than the amount owed. When you hear stories like this, you have to wonder why banks are doing business the way they are.

Though the following is an excerpt from an article stating that banks prefer to do short sales, I found this section compelling:

“It matters little to service providers whether the home’s value falls or the home goes into foreclosure because the service provider gets paid regardless. Service providers make money a number of ways such as receiving a service fee, default fees, floated interest and/or from investment interests in the loans the provider services.” ¹

My home was foreclosed on by a service provider. Since the deregulation of the banking industry, many banks have hired service providers to manage their loan portfolios. Often, the company you make your payments to is not the company that holds your loan.

Mortgage service providers are responsible for the day-to-day management of your loan, such as collecting payments and making property tax and home insurance payments from your impound accounts. These servicers have come under fire for how they have handled customers who are in default, and have been urged by Obama’s administration to permanently modify thousands of loans to help clients avoid default. It has been argued that, because of the lucrative fees they charge, they have prolonged loan modifications to maximize collecting these fees. They are the middleman between you and the holder of your loan.

So, this also makes me wonder why the owners of the loans are not stepping in and stopping the servicers from costing them money. There is a myriad maze of reasons, and I really don’t think that any one reason can be pinpointed as the overriding reason.

One author states that because 85% of the loans have been securitized into one giant pool of money, and the banks own portions of the pool of money, rather than directly owning a loan, it is difficult to tell who really owns the loan. If that’s true, then who do the loan servicers pay for the rights to collect the payments on behalf of the banks? In actuality, some of the servicers are actually the lenders, but the investors in the pool of money have first rights to receive the principal and interest payments.²

Another states that banks prefer foreclosures over short sales because it makes them appear more profitable to their shareholders. Due to accounting principles, in a short sale, the banks would have to write off the loss in value of the home, whereas if they sell the home to their Real Estate Owned (REO) pool, they can claim to still retain the full value of the asset.³ Now you also understand why the banks have had record profits over the past few years, despite the dismal economy!

There are so many more reasons, but I’ll have to explore those in another post. In the meantime, this paper is an interesting read if you are interested in understanding how the financial morass was created. It’s written by a couple of lawyers, but I found it to have simple enough language for those of us not legally-minded.

Now, I do realize that all this information doesn’t exactly get you off the hamster wheel, but I find it helpful to understand how I wound up on it in the first place.

¹ http://homebuying.about.com/od/shortsale/f/Banks-Foreclosure-Short-Sale.htm

² www.en.wikipedia.org/wiki/Mortgage_servicer

 

Still Waiting

I have news – big news – well, maybe not so big, since I already proclaimed this before. I am moving. I am packing in earnest now. Packing up the whole house. Preparing to relocate. Walking away.

Okay, not walking away from the lawsuits, but walking away from the house.

Why? Why would anyone fighting for their home choose to walk away from it?

Because the appellate court refused to rule on establishing what a reasonable rental rate should be, I would have to pay $2,000 a month in rent. Again, this is $600 more than I was paying on my mortgage, which was $70,000 higher than what the house is currently worth. I just don’t see why I should have to pay more on a house that has a significantly lower value. (Yes, I am aware that I’m starting to sound like a broken record, but this is truly mind-boggling to me!)

“But you haven’t had to pay rent or a mortgage in 3 years.” Yes, this is true, but I have had to pay attorney’s fees, which are the equivalent of what I would have spent over that period of time anyways, if not more. Paying rent and attorney’s fees is like paying double rent. And I don’t get a tax write-off, unlike if I’d been paying on a mortgage.

I realize that the rental market has skipped along in the past few months, outpacing home sales, which is why rentals are becoming so expensive. People aren’t buying homes, are probably wearing out their welcome with the relatives they have been bunking with, and are unable to purchase a home either due to a previous foreclosure or increased difficulty in getting credit. The job market seems to finally be starting to stabilize (though this author remains without permanent work). So, as more and more people return to renting, the number of places available to rent are decreasing. It’s the basic economics of supply and demand – as demand increases and the supply decreases, prices must go up. It is part of why the mortgage company set their rate so high, despite the amounts they swore “under oath” on the eviction filings. They are claiming that I must pay the “going market rate” to rent my own home.

This kind of goes back to that “new” program Bank of America is rolling out in a few select states. (It’s not new, but a revival of a program implemented after the Great Depression.) To refresh your memory, they are offering homeowners in danger of foreclosure the opportunity to turn over their deeds, then rent back the house at “lower than market” rates. How nice, did you say? Well, what if “lower than market” rate is actually higher than their mortgage payment? If they couldn’t afford their mortgage payment, they certainly won’t be able to afford the rent, placing them in danger of eviction anyways. Don’t you just love it when things come full circle?

Before I received the news about the appellate court’s decision, I spent a lot of time thinking about what would happen if I had to pay rent higher than my previous mortgage payment. What would I do? What should I do?

You can rack your brain for hours, but I have to say, there are times you just have to listen to your gut. The thing screams louder and louder when you’re thinking about stuff that just doesn’t jive, will cause you stress in the long run, or just is the wrong decision. Eventually, you either listen to it, or wind up feeding it some pink goop to get it to shut up.

My gut told me not to pay rent.

Also, the question rankles around the corners of my mind “Why would I want to give more money to the company that screwed me over?” Now, in court-ordered rent situations, the funds do go into an escrow account and are held by the courts. But if you lose, all those monies get turned over to them. Given the partisan attitudes I’ve observed from my local judges, I don’t want to make that gamble.

So, I asked my attorney how moving would affect my cases. He said it wouldn’t affect them at all – I can even still pursue my fight on the eviction case. It may even be in my favor, because being forced to move and quit the property in the middle of the fight piles on more damages, perhaps prompting the mortgage company to move towards a settlement offer.

It changes the nature of the game. Rather than fighting for my home, I am now fighting to get justice for the illegal activities of my lender.

I won’t actually leave the house until the day the sheriff comes knocking at my door. Which could be any day now. I don’t know if the mortgage company has to wait x number of days past the due date to request the court to evict me. I’m sure I’ll find that out soon. Once the sheriff serves me with an eviction notice, I only have 5 days to get out, which is why I’m packing up everything now. How funny that things have come full circle from my first blog post “Waiting for the Sheriff”! I’m back to waiting again.

It feels really good to have made a decision and taken action on it. Knowing that I don’t have to spend much more time hunkered down in this little bunker, stuck in my energy, puts a big smile on my face.

I have no idea how much longer these court cases are going to drag out. I do know that I’ve had so much difficulty finding long-term work locally – not just these past few years, but in other times I’ve lived here – it’s like a big cosmic sign that I’m not supposed to be here. I live near where I grew up, and I moved back after college, then again after grad school. Now that my parents have passed on, my relatives are scattered across the country, and all of the friends I grew up with have moved away, there’s really not much for me here anymore.

With this freedom from my house, I can earnestly go after those jobs in other areas where I’m more likely to get hired into the kind of work I want to do. Whereas it’s scary to completely uproot myself from my hometown, it’s exciting, too, because I know that I can make a home anywhere I choose.

What do you think? Would you do things differently, or have you been faced with this dilemma yourself?