October 2008 Field Hands of the Month: Constance Steinkuehler and Kurt Squire

It was great reading about the successful Madison event.

Al, I don't know if you saw this, but late Thursday Fannie and Freddie announced that they will suspend all foreclosure action on owner occupied single family homes beginning the day before Thanksgiving until early January.  So that's good news.  As you know, I'm in the mortgage business and one of the really difficult aspects of the housing/real estate problem is that most of the fraudulent and faulty lending was on investment properties - most of it new construction but a fair amount of existing construction as well.  Everyone - investors, lenders, brokers and buyers let greed rule the day and many people were buying up multiple properties in a couple month's time expecting to be able to resell them a year or two later at a huge profit.  Some of these investors actually had renters but many of them don't even have tenants.  These investment properties are a huge percentage (possibly 80%) of all of the vacant, foreclosed, unable to sell properties in everyone's neighborhoods.  In many markets, you will have, for example, a block of 100 homes and 30 of them will be in foreclosure and of those 30, at least 25 of them are not owner-occupied. 

So while foreclosure suspension and loan modifications are options for those who are struggling to pay mortgage payments and actually live in their properties, (and organizing to prevent victims of poor loans and the poor economy from being foreclosed in the months and years to come is a very worthy cause) the U.S. real estate market badly needs investment buyers to purchase these abandoned and foreclosed investment properties.  

Unfortunately, the pendulum has swung too far in the other direction in the past 6 months and likely investment borrowers with good credit who would be good risks are unable to purchase these investment homes due to the restrictions placed on them by nervous financial markets.  As someone with firsthand knowledge of this, it's next to impossible to find a borrower who meets all the new tight restrictions for purchasing investment properties.  Bottom line is that loans that should be being made are not being made to good risk borrowers. 

I raise this point because many politicians not familiar with these details think that homeowner foreclosure prevention and homeowner loan modifications will get the housing industry back on it's feet.  It's not even a drop in the bucket of the real core housing financial disaster we have on our hands.

http://www.google.com/hostednews/afp/article/ALeqM5hlAPfoi7lMVB_Bwd1yDmhBSGqgCQ

One more thing: It might be helpful to point out that most of these faulty and fraudulent loans were in 2005 and 2006. The greedy investment borrowers were using programs of no income verification, getting 100% financing with no downpayment required and were going to multiple lenders at the same time. This was a fraudulent way of preventing one lender from knowing that another lender was providing financing to the same borrower for another property.  (If they did, the borrower in most cases would not have qualified for multiple loans.)  To make it even more complicated, the borrower was stating he was going to occupy the property he was purchasing.  So most databases erroneously have these properties as "owner occupied" when in fact that never occurred. 

At the first sign of a market downturn, with no money into the deal, these real estate investors/speculators stopped making mortgage payments in 2006 and 2007 (if they made any at all). So the majority of these properties have been sitting vacant for close to 2 years while the foreclosure-burdened courts try to get these through the process.  Of course to make matters even worse (if that's possible) those that have gone through the court process are now being sold by financially weakened lenders (Citi with stock now below $4.00, etc) at quick sale prices that further bring down neighboring home values.  A property outside of San Francisco for example that sold for $485,000 two years ago and now, in good condition, is expected to sell for $90,000. 

This is really too kind. I guess we have to press on! A few notes and a question for the Fieldhands:

Its really easy to join in wherever you are.I also can't stress enough how, like Al said, it really gives people who are itching to do something something very tangible to do. About half of my Obama team wants to get involved, for example.

1. Simply get the local paper (Alexandra says you can do it online, too, but we're going old school). Look up foreclosures in the legal section (ours are in the sports section). Circle 'em. They're not all listed the same way, but don't fret. You'll get a feel for it after looking at them.  Sadly, there's a lot.

2. We're still figuring this out, and it may vary by state, but up here, they are listed once per week, 3 times on consecutive weeks. Having each person take a day is a nice way to divide the work.

3. Next, open up the map and plop the address in. You'll see an option to "add to map". Choose the Field Foreclosures map.

4. It will only take a  few days to get a feel for it. We have missed a day or two here or there but still you can see the map coming together.

The second thing I wanted to ask folks about was whether anyone (especially in Chicago) was familiar with the National Training and Information Center. <http://www.ntic-us.org/>? I assume it's some sort of national organizing group for community organizers? The new executive director, George Goehl is an old buddy of mine (and a fantastic multi-instrumentalist musician, as well as film director). I imagine that it's all much more institutionally-oriented than where the Fieldhands are inclined to be, but I can say that George is a good egg.

If there are foreclosure efforts happening in Chicago it might be good to touch base, though.

How does it "make matters even worse" if a property is unloaded at firesale prices, so long as the buyer's putting up REAL money?

Democrat for US Senate (Wisconsin 2012)

You deserve it!

The problem with firesale prices is that the lending business is based entirely on appraisal reports (10-20 pages long with photos for each property where someone wants a mortgage) by licensed appraisers that determine the value of that property based primarily on the most recently sold 3 similar homes in your neighborhood. (Recent being defined as in the past 3-6 months.) So if your home is worth $250,000 but there were three recent foreclosure sales in your neighborhood of similarly styled (size, age, appearance, etc) homes at $100,000, and you wanted to sell your home, you would have a hard time getting an appraiser to still appraise it anywhere close to $250,000.  My point was that yes, it's a sale with a downpayment but that sale dramatically decreases the value of other non-foreclosure homes in the area.

Some states have newspaper associations. They usually include a Search Public Notices section for the state and by county. You can enter search terms like ‘foreclosure’ or whatever you like. I mention this so that you can use an online search to doublecheck that you’ve caught them all.

For example, Arizona here:

http://publicnoticeads.com/AZ/search/searchnotices.asp

And Wisconsin here (look under Open Government link at left, although not working for me just now):

http://www.wnanews.com/

On the other hand, states like Georgia have a different system, but you can still search online by county, and there is a drop-down list of topics that includes foreclosures.

http://www.georgiapublicnotice.com/

If your state has an online policy for its public records, there is usually a site that you can google to find.

Eg: google << Search Public Notices New York >> or << Search Public Notices Florida >>

I have really enjoyed your clear-headed explanations of the effect of this mortgage crisis over the past months whenever you've chosen to enlighten us. Your latest response (to Ben) underscores for me how we really are all connected to each other's fortunes, in a way.

A $485,000 house sells for $90,000? The people around this person lost $300,000 in equity. Each one of them. What if one of those people was an elderly person who needed to go into assisted care housing? He or she is f**ked.

Or, the the previously $250,000 house selling for $100,000? It would have been more worthwhile for the neighbors to chip in to help keep their equity value up while they rode out the storm.

I noticed that Mexican developers are creating assisted-living care developments, first for the Dallas market, and then the NE, for baby boomers who will not be able to retire in the US. Price? $1,100/month, all in. Medical $350/year. This was in the Dallas Morning News last Sunday. And the places looked nice. The Mexican developers said this wasn't a matter of luxury housing. It would be a necessity for those who can't afford to live anywhere else.

lately for foreclosure information is www.foreclosure.com.  You can get a sense of the scope of what you are looking at.  It's very easy to navigate - just click on the map to drill down to a zip code or city, etc.  From there you can either get the detail from a local newspaper or pay a subscription fee to this website for details. 

The site is updated numerous times a day.  As of today it  lists 492,623 properties in pre-foreclosure  and 543,621 in foreclosure throughout the U.S.  The numbers are staggering.

Here's an example of the data in Clark County (Las Vegas) Nevada where over 40,000 homes in that one county are currently in foreclosure or pre-foreclosure - a huge majority of them purchased by speculators in the past few years. 

http://www.foreclosure.com/search.html?st=NV&cno=003&z=&tab=f

Well done, Kurt and Constance, power couple extraordinaire!

Worse, I guess, is a matter of perspective. A couple years ago, the "crisis" in Madison was a lack of "affordable housing."

The folks whose $250,000 house is now "worth" $100,000 still have a house. As do the folks who just got themselves  a house for $100,000.

Democrat for US Senate (Wisconsin 2012)

to Kurt and Catherine...from the 1st FHOTH for June! Wow! What a difference you are making!

I will soon be sending updates of what our homeowners' association is doing in our historic neighborhood.

We had our 1st meeting yesterday. All of the empty homes and those in danger have been id'd.

I personally have to be a more "silent" participant in this particular fight because hubby works for the Wayne County Treasurer and we don't work even the appearance of a conflict of interest. Hubby does "foreclosure prevention" workshops all over the county.

Just today was published in the paper all of the people who are in danger of having their homes seized for back taxes, which the Treasurer is trying to prevent...working with people to catch up rather than waiting until they see the sheriff.

I, myself, although I've been active with the homeowners' association for years (starting before hubby got present job), will be working more with education and small business start-ups rather than foreclosures in the City because of hubby's job.

You two are VERY inspiring.

I will be working with a couple of other people I met at the Moveon.org meeting last Thursday night to work with 16-20 y.o.s in Detroit--my speciality age group.

Again...Congrats!

waterprise2 AKA Pam

Liberal with a Capital L!

Great postings about the mortgage lending industry, Catherine.  I love the clear analysis.  Nevertheless, I tend to agree with the discipline of *not* counting one's chicks before they hatch, of *not* borrowing -- nor planning in one's mind to borrow -- against the unrealized "paper gains" of ballooning real estate.

The neighbors in my little town in northwest Connecticut typify the extremes of prudence and extravagance.  Each bought their modest farm homes and land (for $40k and $25k) in 1976.  The divorced Mrs. $40k raised her three and long ago burnt her mortgage, living within her means.  Mr. and Mrs. $25k raised their three and repeatedly tapped their increased home equity.  They are now upside down to the tune of $400k.  Retired with a state pension, Mr. $25k scrambles for part-time work seeking to keep up with his loans.

Thanks for that rich example, Walter.