CASH FOR ....?

August 4, 2009

Now that the automakers have been further "stimulated" by the "Cash for Clunkers" program, who's next in line? The $75 billion earmarked for the "Homeowners Stability Initiative" is being whittled away by more handouts to everyone but homeowners. After many months, this program is inexplicably spinning its wheels and distressed homeowners wait for the assistance promised by the Obama administration. This is another example of the money set aside for the Homeowner's Stability Initiative program going to help other causes - namely, those with a stronger lobby in Washington (i.e., banks, brokers, insurance, automakers, etc.).

In areas hardest hit by the real estate collapse, especially in areas with historically high home prices, this program could provide significant relief. There has been no assistance provided to homeowners with "jumbo" loans, who now see their investments further and further underwater and who have suffered larger losses, percentage wise, than most. Is the Administration and Congress purposely ignoring the housing issue? They seem buoyed by recent increases in pending home sales and hesitant to take action.

The problem with the increased pending home sales figures is that they mainly represent foreclosed properties that are being sold far below market value. Not only does this not help homeowners trying to retain their homes, it further depresses comparative values of the surrounding neighborhoods making a real recovery of prices impossible.

There has been extensive reporting of the increase in "pending" home sales, but nothing is being said about the reason or consequences associated with this perceived recovery. An average of only 15% of eligible mortgagees have even been approached by their lenders to modify their loans, with some lenders only at 4%. These are the "big boys" of course, Citibank, Bank of America, Wells Fargo - well you know the players. And the "mortgage servicers" like Saxon Mortgage are simply a joke. They are simply shilling for "investors" who, for some strange reason, wish to remain anonymous. These companies are required to produce the actual names of the "investors" if requested by the mortgagee. However, we've heard of no one who has actually gotten a response. By ignoring this request, they should have all of their rights concerning foreclosure stripped. Furthermore, these "servicers" should be required to pay off each mortgage that they've ignored and the "investor" must then turn over the property to the homeowner with a clear title. Only by creating significant penalties will these crooks begin to play by the rules.

Principal reduction is an huge and important issue that lenders still refuse to address. They will not face reality, instead they are certain Washington will protect them from having to do the right thing. How can lenders expect homeowners to continue to pay property taxes on a home that is now worth 30%-40% less than the mortgage and the value listed on the tax rolls? Property taxes are a huge annual payment for homeowners living in States with excessive taxes and this tax can represent a difference of $10,000 or more between the inflated value of the home recorded on the tax rolls versus the current market value of the home. Again, these State governments are insisting that homeowners pay the inflated tax bill, so that culprits like California can continue to support illegals. Do we really want to give these clowns our money to simply play with as they please?

So what's the homeowner to do? Lenders would love to continue down the current path, foreclose on as many homes as possible and continue to ring their cash register. All homeowners who are currently underwater in their loans must insist that Congress address this issue immediately. Withholding property tax payments, while potentially hurting a home owner's credit rating, is the only way to get State governments to address the problem. We are advocating that all homeowners adopt this stance and demand State and Federal governments take action before more hostile approaches are taken by taxpayers. While we do not approve of civil disorder, our elected officials had better wake-up before they are faced with some very difficult decisions.

Distressed homeowners deserve the same attention that other troubled institutions have promptly received. Banks, mortgage companies, insurance companies, and the auto industry have enjoyed multiple injections of taxpayer money to keep them alive. Many of these recipients of taxpayer money are the same entities that caused the crisis, but they are strangely the first to find relief.

Speaker Pelosi, Chairman Frank, Secretary Geithner, Representatives and Congressmen from California (where property taxes and State taxes in general are totally out of control and unsustainable) are in positions to get some action for homeowners. For example, exactly what has House Representative Lois Capps, who represents some of the highest property value areas in Southern California, done for her constituents? The answer is NOTHING! She has meekly sat by as her District continues to see huge decreases in property values. We warned that we would begin calling out individual members of Congress that are doing nothing for their constituents. Unfortunately, it's beginning to look like I'll be listing quite a few names from both sides of the aisle.

These elected officials are totally in the pocket of banks and lenders and fear for their political lives. I can guarantee that this is not something they need worry about. If they do not take immediate action, voters will decide for them and the result is going to be very disappointing for them.