Surviving the Housing Crisis

Don't let the news media drown you in fear!
After all, this is the page the St. Petersburg Times does not want you to read nor believe!

A PDF version of how to survive the real estate and mortgage crisis is available:
Click here to view.

A most important document you should have as a homeowner, especially if you have a mortgage:
Your Rights as a Homeowner
This document is a PDF file and you can save the document locally on your computer for future reference.

Since the housing crisis began with a record number of foreclosures being filed, house values dropping and the homelessness that (for the unlucky few) has resulted, I am dedicating this topic to you, the homeowner, who may be struggling with the mortgage payment or trying to sell your home in this strong buyer's market. Unfortunately, the news media - especially the St. Petersburg Times and its staff writers, Mark Puente who used to cover real estate issues and Jeff Harrington, who still covers business and the economy (as of 2015, when this topic was revised) - is in the sole business of making a profit off of the housing crisis by scaring the public and putting homeowners in fear of what their value of their home is worth among other things.

UPDATED! Recently Mark Puente somehow is cleaning up his act in regard to scaring the public about home values and the housing crisis among other things. There are two articles that prove this point; feel free to click on the links below to the following articles at the St. Petersburg Times:

Pasco couple fear losing home to foreclosure for paying mortgage too early, 20 August 2011 - Story about a couple in Pasco County who feared losing their home to Bank of America for paying too early.  Corporate bullying by Bank of America at its finest - pay your mortgage early and we'll do everything to kick you out of your home and onto the street.

One day late with mortgage payment, gas station owner could lose business to foreclosure, 4 August 2011 - Story of a Mobil gas station owner located at Duhme Road and 54 Av N in Seminole who feared losing his gas station to BB&T for one payment late.  Again, corporate bullying by BB&T at its finest - be one day late on your payment and we'll do everything to close your business and kick you onto the street too.

Just recently the St. Petersburg Times published a multimedia report on the foreclosure problem that is driving the housing crisis.  It is well organized but the element of fear is contained, especially in St. Petersburg Times stories concerning the housing crisis.  Besides, a newspaper such as the St. Petersburg Times has to survive on two principal forms of revenue if it wants to stay in business scaring the public:  Advertiser revenue and circulation numbers (in other words, how many papers sold on a given day).  There are two words that guide the news media when it comes to reporting stories:  Blood Sells.

In this regard, this topic is considered as a topic to counteract what the St. Petersburg Times is reporting.  The facts I present here are based on my independent research of the housing crisis from many different angles over the years the housing crisis has unfolded.  Besides, I have covered the housing crisis as well as the credit crunch a few times over at my blog.

First, how did the housing crisis happen to begin with

It was 2001. The real estate market was good.

Back then, the lending standards for mortgages were strict.  Your credit was checked and you had to bring income documentation among other things.  Based on the lender's strict standards, you were approved for the mortgage and bought the home you wanted.  That's the way mortgage lending should be to begin with:  Buy only within your means.

Fast forward to 2006, and the height of the real estate craze.

Real estate speculators were profiting from the real estate craze by flipping homes and making a profit, artificially driving up the values.  Here in St. Petersburg, developers from the Miami/Ft. Lauderdale area came to town and bought up plenty of the apartment complexes so that conversion to condominiums can be made.  What was in these greedy developers' minds?  PROFIT!  PROFIT!  PROFIT!

At the same time, the developers who bought out these condo complexes priced the units way too high.  The purpose:  Not only to make a profit, but to run out of St. Petersburg people who belonged in the middle class:  Those that were making a good income from employment and at the same time wanted to stay close to work.  Unfortunately, the middle class was forced to end up living in the suburbs making for extra long commutes to and from work.  Mix this with a very inept mass transit system in the Tampa/St. Petersburg metropolitan area and you have a recipe for gridlock as well as a major disturbance of the work-life balance.

Unfortunately, for some families the commute between home and work was so intense that relocation outside of Florida had to be an option.  People were moving out of Florida at an alarming rate.

Ask yourself:  If you lived in the New Tampa community (Bruce B. Downs Blvd. and Interstate 75, Exit 270) and you had to commute to downtown St. Petersburg - you got that right, downtown St. Petersburg - on a daily basis, would you have to resign from your job that you had for so many years in downtown St. Petersburg due to the extra long commute to work?

Then mortgage companies began to sprout on the market, which specialized in one thing:  Get people who could not otherwise qualify a mortgage, which is called sub-prime lending.  Many of these mortgage companies I believe were divisions of banks set up for this.  These mortgage companies did not care about your credit or your means to repay over time - instead, these mortgage companies wanted to place you into a home for less than what you would pay for apartment rent.  The sub-prime lending craze had begun:  Just lower the lending standards to get people into mortgages they can't afford.

Then came the Stock Market crash of 2008

Real estate property values went on a tailspin.  Companies were laying off employees left and right, spiking the nation's unemployment rate.  People who bought homes during the real estate craze were finding out that their properties were underwater as to their value.  Foreclosures - the judicial action taken when a bank takes a property by reason of failure to pay for the mortgage - have spiked.

The news media went on a major frenzy on the phenomenon called the credit crunch that followed.  As foreclosures staggered, banks were tightening their lending standards.  The news media went on a scare tactic frenzy telling the public that you could no longer get a mortgage or even a car loan.  Not only that, the banks went on a lower the credit limits on credit cards spree and the news media was quick to cash in on that fear as well.

Uncle Sam stepped in.  As a result of Uncle Sam's intervention federal bailout money was given to the banks in the hopes of loosening the credit market.  Instead, the banks begin to treat their customers like if they were second class citizens and hoard that bailout money or worse, pay the bank executives millions out of that same bailout money.

Now that the credit crunch and the mortgage crisis was in full swing, the news media - especially The Tampa Tribune and the St. Petersburg Times as well as Bay News 9 (hey, the St. Petersburg Times and Bay News 9 have a joint alliance where stories are shared - after all, if the St. Petersburg Times' Mark Puente as well as Jeff Harrington had a scare tactic story in print they can ask their supervisory editors at the St. Petersburg Times to put the story on television on Bay News 9 for maximum fear effect) - was having a field day as to how to cover the credit crunch and the mortgage crisis to scare the public.

As a result, here are the effects being played by the banks as a result of the credit crunch, reported by the news media for maximum fear and scare effect:

Interest rates on credit cards being jacked up so high on purpose that you cannot pay it off.

Creditors playing games with your FICO credit score.

Credit limits (especially on credit cards) being trimmed for no reason despite a customer’s satisfactory credit history.

Customers being denied lower interest rates on credit cards. If a customer’s APR was so high banks would lower the rate on request in the interest of retaining good business.

Reports of difficulty applying for a home mortgage or a car loan, exaggerated by the news media.  After all, the news media wants you scared!

OK. If you want the real truth on the credit crunch, this is how I look at it.

Let’s start with the banks.  The greedy big banks whose purpose is to treat its customers – even its best customers (who of course pay their bills on time among other things) – like second class citizens.  When the big banks were being given federal bailout money in order to recoup their losses due to the bad mortgage market it was in the hope that access to consumer credit would be loosened.  Instead, the big greedy banks sit there and hoard that money while at the same time treat its customers like second class citizens such as jacking up interest rates or cutting credit lines.

After all, banks who practice poor customer service by jacking up interest rates and/or cutting a customer’s credit line (such as a credit card’s credit limit) will eventually suffer in the form of lost business.  Customers practice good money and credit habits by only spending within their means.

How about mortgage modifications?  How about the person who got laid off through no fault of their own and is struggling to make ends meet?  Banks and mortgage companies – according to what’s reported in the media – like to mess up a person’s credit report when it comes to having to modify the terms of a mortgage.  In this day and age, if a borrower as a legitimate reason to have his or her mortgage modified to allow for lower monthly payments, he or she should be allowed to do so without any black mark being noted on a credit report.  After all, it’s these mortgage loan officers that approved these loans in the first place, knowing that he or she would not qualify.

Besides, all these mortgage loan officers wanted was that big commission check and that trip to Cancun or somewhere in the Caribbean. These mortgage loan officers work on commission.

Now for a horrific credit crunch story that I feel was mishandled in the media:

A homeowner who had a second mortgage and who wanted to sell can do so; anything owed on a second mortgage would be paid at closing (provided you have the funds of course).  Instead, the bank who holds the second mortgage keeps the homeowner in the home until the second mortgage is paid in full.  The end result:  A homeowner who cannot sell even though the bank holding the second mortgage would be paid at the closing table.  In my opinion, I would not be dealing with this mortgage lender at any time, period, no questions asked.

No mortgage holder - I don't care if it's a first, second or both - has the right to keep you in your home until the mortgage is paid for.  If you feel that your personal circumstances are dictating that you have to find some other place, you have the right to put your place up for sale.  This is why there are real estate closings in which papers are signed and monies are exchanged.  If you are in fear of being underwater on your mortgage, read the next section, Surviving through the Real Estate and Mortgage Crisis.

In Australia, mortgages are handled differently.  Unlike America, Australian mortgages are of the recourse type.  Explanation:  You are expected to stay in the home until the mortgage is paid off.  Ladies and gentlemen, I'm sorry but this is NOT Australia - this is America, and we Americans do our mortgages our own way, good or bad.  Besides, we sing The Star Spangled Banner - never Advance Australia Fair - as our national anthem at Tampa Bay Rays games at Tropicana Field as part of the pre-game ceremonies.

Surviving through the Real Estate and Mortgage Crisis

There are plenty of people in America struggling to make ends meet with the high mortgage payments.  As this is a strong buyer's market, people are having a tough time selling their homes.  Additionally, the combination of greed by real estate developers and mortgage brokers plus property values that have taken a tailspin have resulted in homeowners being underwater on their mortgage - in other words, owe more than it's worth like a car.

Unfortunately, the news media capitalizes on this major fear all the time.  The good news:  You may not be underwater like you think you may be, your mind being programmed by the fear mongering news media such as the St. Petersburg Times.

Let's discuss survival through the real estate and mortgage crisis in depth.  Now before I go on further, I need to add this disclaimer:  Although your webmaster holds an Associate in Science degree in Legal Assisting, none of what you are about to read should be construed as legal advice.  If you happen to have any legal issue involving mortgages, real estate and property values, it is best to discuss these with an attorney that is licensed by the Florida Bar (or your state's bar outside Florida) and who specializes in real estate issues.

Your Property Value

This is one of the major areas in the real estate market that the news media likes to report on frequently.

The first thing about your property value is your county's property appraiser office, and each county in Florida has one.  (Out of state residents:  The name of your governmental office that deals with property values may sound different).  The job of the county property appraiser is to determine the just value of each and every property within the county for the purpose of computing your annual property tax bill which arrives in November of each year.

However, the value that the property appraiser says is for your house is not - repeat not - your property's value.  The county property appraiser hires a staff of staff appraisers who go out and appraise properties en masse.  Then sales from the previous years - including qualified and unqualified sales - are factored into your appraisal to arrive at what's called a just value.

If you happen to have a homestead exemption - a benefit courtesy of the State of Florida for living in your principal residence - the just value is deducted by the amount of homestead exemption you have.  (There's also the Save Our Homes cap which helps lower your assessed value, but we won't get into that here).  The end result is your assessed value, which the county tax collector uses to figure your property tax bill.  On the other hand, if you do not have a homestead exemption on your property then your taxes are calculated on the just value.

Earlier in the next to previous paragraph I mentioned what is a qualified sale and an unqualified sale.  A qualified sale is your typical person to person real estate transaction that takes place at the office of a title insurance agent, which is known as the closing.  There papers are signed by you, the seller, and your mortgage lender but the mortgage lender will have done their paperwork before the closing.  At the end of the closing process the seller hands you the keys to your new home and you're all done.  On the other hand, an unqualified sale is a real estate sale that occurs mainly as the result of a mortgage foreclosure sale, but there can be other factors such as a short sale (where a mortgage lender takes less than what is owed) and a foreclosure as a result of action taken by a condominium association such as failure to pay the monthly maintenance fees or special assessments.  Unqualified sales tend to sell for much less than property appraiser just value.

Even though your county's property appraiser shows a value for your home, it is used only for the computation of your property tax bill.  Even in the buyer's market we are currently in as of 2011, homes sell for much more than what the property appraiser says.

The Internet has enabled private companies to offer home values, and a well known company is called Zillow. While Zillow is a handy tool that can be used to gauge what house values are throughout the United States, it like your county’s property appraiser should not be believed in what your home is worth.  Zillow from what I understand has two methods in determining your home’s value:  First, Zillow gets its data from publicly available sources including – where else – your county’s property appraiser.  Second, Zillow applies a formula which is kept secret from you and I and then taking these two elements together, Zillow comes up with what they call a “Zestimate”.

OK.  Whatever you see on your county's property appraiser web site or on Zillow, neither your county property appraiser nor Zillow is the Gospel of your property value.  To appraise a property in Florida you have to be licensed and receive extensive training.  Which leads us to the next paragraph.

If you decide to move forward and sell your home in this buyer's market, you should budget this expense when you go to sell your home and this should be on your to-do list: Hire a qualified appraiser and have him or her do an all-purpose appraisal of your home.  What an appraiser does (as opposed to what the staff appraisers do in the county property appraiser's office) is researches the property appraiser records of all qualified sales over a certain time period in the vicinity surrounding where you live.  Additionally, the appraiser will come to your home and take a look at what you got; if you have made any substantial improvements to the interior of your home tell the appraiser too.  In the end, you will receive - in your hand - an appraisal that will be yours.

The major benefit of having an all-purpose appraisal is that you have an appraisal in your hand which you have ordered, not one that the banks order as part of the mortgage underwriting process as bank ordered appraisals are often times biased.  Besides, when you have an all-purpose appraisal in your hand you can show this to prospective buyers showing what your home’s value is really worth.  For those of you considering refinancing, you can take this all-purpose appraisal with you to the bank to prove what your home is worth.  Appraisals usually cost in the ballpark of around $300, but it is money well worth spent.

Before you hire a qualified appraiser, be sure to check out the reputation of the business.  In Florida, check to make sure that the appraiser you select is licensed, as it is Florida law.  In other states, check your state's laws.

Your Mortgage

OK.  Now that you have an appraisal in your hand, you can tell if you are underwater in your mortgage for real.  If you find that you are not underwater, congratulations!  On the other hand, if you find that you are indeed underwater, there is still hope for you.

If you intend to stay in your home but are struggling due to the mortgage payments, by all means DO NOT STOP PAYING ON YOUR MORTGAGE!!!  Instead, contact your mortgage lender (it's on your mortgage loan paperwork such as your monthly mortgage loan statement) and ask for the person responsible for loss mitigation or a similar department.  In this day and age of home foreclosures, a reputable mortgage lender would more than likely work with you rather than commence a foreclosure action.  Besides, a foreclosure costs the bank or mortgage lender in the ballpark of $50,000 (such as filing fees, attorney's fees, etc.).

On the other hand, if you are struggling on your mortgage payments to the point where you can't take it anymore and you want to sell but you are underwater, there is what is called a short sale.  A short sale is where the mortgage lender accepts for less than what is owed on a mortgage.  Short sales are complicated and may have financial and legal implications; therefore, consultation with an attorney is highly recommended before you pursue this route.

There is also deed-in-lieu-of-foreclosure, but this is for homeowners who have had foreclosure proceedings already begun or about to begin.  Again, consultation with an attorney is highly recommended.  If you have other debts that you are struggling with, there is also bankruptcy in United States Bankruptcy Court but beware:  Bankruptcy will shatter your credit report and it will remain there for 10 years.  If you decide to go the bankruptcy route talk to an attorney that specializes in bankruptcy law - the federal court rules and procedures as far as bankruptcy is concerned are very complex and you will definitely want an attorney to represent you.

The main idea is for you to stay in your home.  Should you be served with court papers by a deputy sheriff or process server indicating that foreclosure proceedings have been initiated against you, get an attorney fast!

I have also heard of mortgage lenders resorting to extreme activities such as changing the locks without permission, making visits to your home without your permission and other intimidating and harassing behavior.  You should know that what these mortgage lenders are doing are violating your private property rights - after all, you are the owner of your home even though your mortgage lender has an interest.

If your mortgage lender (or their agents, such as private investigators hired for nothing more than harassment) show up at your home for no reason, you have the right as a private property owner to ask them to leave your property and if they refuse, immediately call 911.  What your mortgage lender is doing is illegal and it entails criminal penalties (such as trespassing on your property, as this is residential private property with no right of access unless you are expressly invited by the owner) and civil sanctions including violations of the federal Fair Debt Collection Practices Act (FDCPA), and if you are the victim of mortgage lender harassment you need to speak with an attorney immediately.

The only way you can lose your home in Florida (or any state that is a judicial foreclosure state) is in a foreclosure proceeding which takes months to work through the judicial system.  If the foreclosure proceeding is in favor of your lender, the judge will sign a order called a Writ of Possession that will be given to the sheriff that authorizes the eviction of the owner after a certain period of time.  The Writ of Possession is the document that transfers title from you to your mortgage lender if you lose in a foreclosure case.

Again, foreclosure is a serious legal matter which can have serious ramifications for you, especially as far as your credit is concerned.  If you are served with foreclosure papers - get an attorney fast!  If you live in a non-judicial foreclosure state (such as Georgia or Alabama) and you receive notification that your bank or mortgage lender has started foreclosure against you, get an attorney very fast!!!

On a side note regarding banks

My discussion on how banks treat people as second class citizens has been given a topic of its own, with the recent news of a major bank charging monthly fees for using a debit card which has brought major outrage across America.  You can read my topic simply by clicking here.