So apparently new stats are coming out that up to 58% of those whose mortgages are refi'd go into default within 8 months after the refi.

No explanation is given for the reason for the new defaults.  I'm assuming that's because the gentleman disclosing the stats was trying to be gentlemanly and not to point out the obvious reason.  When you give a loan to someone who cannot repay it, changing the terms probably still isn't going to help.

I've been meaning to subject y'all to this rant for awhile and between this and the news that the Governor of Chicago is trying to tell Bank of America how to lend, it seems like the perfect time. 
Starting early this year, the judges in Philadelphia County decided that they would not hold hearings on or listen to petitions for foreclosure in traditional motions court.  Instead, the Court implemented this elaborate procedure which shunts foreclosures into a diversion program first and then attempts to obtain alternate funding for borrowers and which seeks to reform the mortgages to better terms.  This system has been heralded by Senator Specter as a wonderful thing and the Senate is considering following this procedure nationwide.  Oh and the courts are looking for more money to help them run this program.

The first set of numbers came in on the success of this program.  Approximately 1,500 foreclosures were filed between April - September.  Of those, only 700 were successfully entered into the diversion program.  From there, 230 people saved their homes.  Another 330 entered into agreements to sell the home, modify the loan terms, postpone the foreclosure or enter into an agreement to let the homeowners make a graceful exit.  (Sorry for the lack of link, I got this from a regional legal newspaper and I can't find a free link in the archive).  Now, we all know that my math is very very shaky, but I do believe that this huge new layer of court intervention was added to save 15% of the homes.  I welcome the corrections to my math that are sure to come.  I did not include the 330 because I do not know how those figures break down between sale/postpone/graceful exit.

This entire process is very worrisome.  The judges in Philadelphia County decided, based on their own interpretations of what was in the interest of justice, that they would simply change the lenders' rights to access to the courts.  I believe there was a challenge raised to this by the various lenders but I am not sure what became of that.  The Court decided to use its powers to manage its docket to effectively strip the lenders of the right to pursue its legal remedies.  In other words, the evil lenders don't get to go to court because the court thinks they were bad and predatory. 

This makes a mockery of the concept of equal access to justice.  I have no problem with those lenders who actually engaged in predatory lending, and they do exist, being told that their contracts are unenforceable.  That's completely fair, after all, if the lender broke the law, the law shouldn't enforce an invalid contract.  But to tell other lenders that they cannot enforce their rights simply because it doesn't seem fair to throw someone out of their house is ridiculous.  This concept of "fair" seems to be extremely limited.  How is it fair to those who are investing in the banks to limit the banks' ability to recover on their loans?  How is it fair to those, like me, who reviewed their finances and knew that they couldn't afford a house or that they would default if they took out a loan so they didn't?  How is it fair to those who do pay their mortgage like clockwork and who forfeit luxuries, such as new cars or tvs or vacations, in order to make their payments?  No, it's not always best to keep people in homes for which they cannot pay.  It's not fair to let them keep something that they didn't pay for.  I was raised to believe that was called theft.

The concept of predatory seems to be expanding to include "did not understand that adjustable rate means it goes up too".  Again, if someone was actively lied to about the terms of the mortgage, that is different.  But the borrowers' inability to comprehend that their house could be taken away and their payments could go up does not per se equal predatory lending.  Nor is it predatory lending if someone took out a loan and then lost their job, got sick, was in an accident, etc.  That sucks and I certainly hope that private charity is available to help.  But that's not the lender's fault and it's not evil and predatory of the lender to seek to enforce the terms of the mortgage.

I am dismayed by the rapidity with which the concept of personal responsibility appears to be being abandoned.  Why on earth are any of us attempting to work and play by the rules?  It most certainly seems that the own "reward" is to pay for those who do not.

So.  Yes.  I have no solution, only the cri de coeur that this must stop.  I hate being an adult, I do.  But I accept that I am and I accept that I am responsible for my life.  And I am damn freaking tired of paying for those who do not.

Posted by: alexthechick at 01:41 PM | Comments (7) | Add Comment
Post contains 921 words, total size 5 kb.