Has Your Dream Home Become Your Worst Nightmare?

29 Oct Has Your Dream Home Become Your Worst Nightmare?

A recent issue of The Reader’s Digest, June 2008, addressed this issue in “HomeSick”. The writer, Lisa Collier Cool, told the story of several young families who had bought homes during the housing boom in the early 2000s. The profiled couples are in foreclosure due to job loss, income decrease, or payment increase.

Ms. Cool looked at the viewpoints of both Democrats and Republicans on ideas of how to solve the crisis. The Democrats, says Ms. Cool, have an ambitious plan where the government would insure failing subprime loans, hoping that lenders would then allow modification at rates that the homeowners could afford. The Republicans, says Ms. Cool, view the lenders as the victims and would endorse a plan that assists the lenders. As we now know, that is exactly what happened in the “Bailout Bill” passed in October 2008.

The Neighborhood Assistance Corporation of America, NACA, has calculated that foreclosure costs banks from $40,000 – $50,000 per house. Bruce Marks, CEO of NACA, believes that his organization’s persuasion of Countrywide and Citigroup to modify (restructure) loans at risk of foreclosure is a win-win situation: it helps homeowners and saves the banks money.

Others disagree as to the likelihood of the success of loan modification, as does my California colleague, Michael Doan, who wrote in a recent blog on this site, that less than 5% of loan modifications are true modifications–that the remainder are “workouts” that keep homeowners in homes that are seriously underwater. His position is supported by Financial Week magazine.

What my clients report is that they have entered into a nightmare when they expected to be living the American Dream: they were promised easy refinancing if they entered into wildly adjustable rate mortgages before any reset would occur, no such refinancing occurred, and their payments have increased dramatically.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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