Strength

Everyone is concerned if we have hit the bottom of the housing market. They have become so obsessed with their home value and the marketplace they have lost sight of what is best for them, their family, and the country.

Since the real estate market crashed we have experienced an increase of sales in the residential real estate industry in the past couple years. However, as you may already know this increase was artificially inflated due to the government incentivizing consumers with an $8,000 housing credit. Nonetheless, the majority of what a consumer read in newspapers, watched on TV, and heard from Wall Street speculators was we have hit the bottom and are headed towards a recovery.

It would be unfair to say all newspapers, television stations, and speculators were saying this was true, but the majorities were trying to be positive about the country’s economic situation.
Whether you agree or disagree if the country is/was recovering; the country’s stock and real estate market were improving. On the surface it appeared the housing tax credit did stimulate home sales. That was until earlier this month. In early August the National Association of Realtors stated homes sales for July declined by 27%. This is the largest decrease in over 15 years.

While it seems that is a large decline some analysts believe the 27% is a skewed percentage. Their belief is if the housing credit never existed home sales would have just kept declining slowly over a period of time at a steady rate, thus the large decline would have never happened.

At Mortgage Foreclosure Report we believe the following:
1. The housing tax credit did stimulate the housing market
2. A massive decline was bound to occur after the housing credit expired
3. The 27% is inflated. We agree with the analysts from the note above.

What does all of this mean? To us it does not mean much except the country is in a state of flux and that our markets are driven by what people hear and believe. When we review our countries history and decipher when we were the most successful we decided it was when we produced goods the rest of the world needed. However, over the past several decades we have become a country of consumers and minimal producers. Our belief is the country has become about big business. From our point of view there is nothing wrong with that except these companies are under pressure to turn a profit and have to make their stock values high. Additionally, in our eyes what made this country strong, besides producing goods, was when the small entrepreneur set out to start his/her company. Nevertheless, big corporations have been structured to hit certain profits every quarter and are incentivized through bonuses. Therefore, their main objective is to what is best for the company. Thus, to be a big corporation and to be competitive in the US outsourcing has become an integral part of doing business. Outsourcing, while understandable and smart for a corporation, leads less production in the country which then leads to fewer jobs which then leads to a slowly declining economy. Please do not misunderstand what we are saying in this article. We are for capitalism and free markets, however, at some point as a nation we have to look at what our major companies are doing inside the US and ask how we can fix the declining economy. Yes, it is not a simple answer and yes the markets are more global then they have ever been. But at what point do we say stop. Currently our country is suffering and everyone’s money is tied up in a market place in companies and portfolios we do not understand. So everyone (we do to at MFR) diversifies. So at what point do we say stop. Stop the outsourcing, stop the greed, and stop the investments in derivates and other financial models almost no one understands. When do we stop? Our country is looking for an answer to solve the crisis at hand and the only thing our great nation can come up with is to spend. Spend our way out of it. I say we have to be innovative and produce. I do not know what to produce but produce. Then we can find a healthy balance between production and consumption.

Sorry for the rant, let us digress. We have become a nation of consumers so we are trying to develop methods of how to get out of this recession, double dip recession, depression, or whatever you want to name it. The way consumers get out of recession is to consume. The method results in us having to spend money, however, if you are unemployed or just spending money on necessities then consumption almost becomes nil..

What does this mean to you? In our opinion many people have become tight with their money because they are frightened. This is natural; however, holding onto your money does not help the country either. Spending helps your local marketplace. We believe for the individual/consumer they have to look at their situation and decide on what are smart purchases for you and your family. If you have lost your job then buying a 60 inch plasma television is probably not a smart decision. It probably makes more sense to buy groceries or pay the electrical bill. However, if you are comfortable in your state of life then maybe buying the television is the smart decision.

Therefore, paying attention to speculators, news reporters, and other media outlets is not a reliable way to make your life decisions. Listen to whether the market is up or down or whether the housing industry is up or down does not affect your current situation. It may affect your long-term investments and it may have had an impact on your retirement. However, unless you are willing to stand on the pulpit and preach you have to make smart decisions for you and your family.

Back to the original point of this blog post, how does the decline in the month of July affect a current homeowner struggling to pay their mortgage? It may affect their home value, it may decrease their property taxes, and it may cause markets to decline. However, it does not help the homeowner struggling to pay their mortgage on a month-to-month basis. Do not pay attention to the news all the time. It is good to know where the country stand as a whole, but the banks and government aren’t able to help millions of people out there who have lost their job or are losing their home. You have to look out for your best interest. Sometimes it means lawyering up and foreclosing on your home (i.e. deed in lieu of foreclosure) and sometimes it means getting advice for people who want to help you. Lawyers have a firm understanding what is going on in this market. While yes they are taking advantage of the current times and are prospering off of it. It is in their best interest to help you.

To sum up this crazy article, do what is best for you. Do not listen to all the junk out there because it can consume you. Do not be afraid to ask for help from professionals. You are not alone many people are feeling the heat of the recession. Things will not change till we all stand as one and force change. However, until that opportunity is upon us you have to do what is best for you and your family. Remember you can start change tomorrow. Each one of us has to change ourselves before we can expect others to change around us and there are always opportunities to prosper even in hard times. Just keep working hard and stay the course that best fits you.

A class action lawsuit was filed against Bank of America (BoA herein) in the state of California. The case is Closson v. Bank of America and was held in the Superior Court of the State of California in the County of San Francisco.  Our understanding was Closson filed a class action lawsuit based upon unethical business practices by BoA and their associated banks. BoA and their associated banks are going to pay out an estimated $35 million in settlement fees for the accusations of their unethical business practices.

The reader may be asking what BoA did in order to pay $35 million dollars back to their customers. In the midst of this recession BoA and associates were looking for various avenues to increase their annual revenues. BoA succumbed to the pressure of having to show increased earnings by taking advantage of their customers. They designed their overdraft fees associated with an individuals’ account to work in their benefit instead of their customers.

Example: Johnny always pays his bills at the end of the month.  He is paid monthly by electronic transfer at the first of each month.  Johnny assumed he had enough funds to cover his bills at the end of the month and forgot he had only $1,000.00 in the bank due to spending extra money on his vacation last month. Johnny’s bills were as follows: $1,003 mortgage, $200 HOA, $350 cable bill, and $450 water/electric bill. The total for Johnny’s expenses for the month were $2,003. Due to Johnny not checking his bank account he did not realize he was short on available cash.  He paid all four bills at once via check on the same day.

In our example Johnny should have been assessed one fee for insufficient funds, returned check, bounced check, etc. Instead the bank assessed Johnny’s account with four cases of overdraft fees. When BoA released funds to pay for his various bills they paid them in order from greatest-to-least. Therefore, his payments were withdrawn in the following order: $1003, $450, $350, $200.  Thus, BoA caused his account to be overdrawn. However, if the bank ordered his withdrawals from least-to-greatest he would of only had one incident of overdrawn funds instead of four.

BoA took advantage of many of their customers by instituting these business tactics. Therefore, the BoA and associates are paying out $35 million in lieu of settlement for these accusations brought forth in Closson v. Bank of America.

Many customers may be eligible to receive $75.00 dollars or more. From our understanding all submissions had to be done by May 1, 2009. However, the nation reported on this matter in late September 2009 and we just read about it locally in October 2009. We are performing more research on why we are just hearing about it now and why the mass media reported on it five months after the due date of the submissions. Please see a local news channel in North Carolina report on the issue.

Example: 

• ED McMahon
  • Ed’s mortgage was worth $4.8M and owed $644K therefore he was behind by 13.42% on his mortgage payments.
• Average Amercian Mortgage
  • The average American home was purchased for $247,900 in 2007 (height of market) according to the US census.  The average person in foreclosure is an estimated eight months or more behind on payments.  Therefore, average monthly mortgage $1,687 X 8 equals $13, 496 or 5.44%.

Ed was living far beyond his means.  His mortgage was greater because the value of his house was greater so his percentages may be greater than the average American, but he was a victim of circumstances just like every other American in financial distress.  His house was on the market for two years at the date of the interview and because he refused to lower the price of his house to a realistic market value he fell so far behind on his payments he had to foreclose on his home.  This is representative of a majority of Americans.  Many Americans are under financial duress, but because they believe the market will rebound or because they love their house so much they are not willing to lower the value of their home to be the market leader in their respective neighborhood.  As an owner you have to be able to bring money to the table if you want to sell your home in this economy or you may land up in foreclosure too.  If a person was certain the market would rebound or you were going to keep your job for ten more years then it may be worth fighting to stay in your home.  However, for most Americans it is to tuff to determine the next month. 

The idea MF Report is trying to convey is everyone is at the mercy of our current economic state.  If we live beyond our means and do not adjust our standard of living to our realty and current economic state then as individuals our lives may become an out-of-control rollercoaster which we are unable to regain control over.  Sometimes we may have to cut our losses to survive and be successful in the future.  Remember none of us have a crystal ball.

Below is a summary of the conversation between Larry King and Ed and Pam McMahon.  Please note it is out of context and not word for word. Enjoy.

Larry King:  What happened?

Ed McMahon:  How much time do we have?  Hahahaha! A combination it is like a perfect storm.  Economy problems.  Selling a house right now is a tremendous operations.  We have had this house on the market for two years.  We must have shown it 50 organizations and/or people. Nobody has made an offer it is a lovely home I hate to leave it I want to keep the home I want this all to work out.

Larry King:  And the payments, what is the problem

Ed McMahon: You know if you spend more money then you make then you know what can happen.  A couple of divorces flown in a few things like that, things happen, you want everything to be perfect.  That combination of the economy I have a little injury I have a situation and it all came together.

 Larry King:  What, you broke you broke your neck.  You feel? What at home?

 Ed McMahon: I do not want to elaborate on that but I feel and broke my neck.

 Larry King:  Has that Stopped you from working?

 Ed McMahon:  Oh sure, you know you cant work with this around your neck and uuuhhhh I have to wear this.

 Larry King:  But Pam the assumption is the McMahons are multi-millionaires and multi-millionaires how much behind are you  $644,000 that is what is reported.  Can’t pay; if you are multi-millionaires shouldn’t you be able to pay $644,000.

 Pam McMahon:  Yeah, I would like to know where those multi-millions are.  Where are those multi-millions Ed?

 Ed McMahon: Hahahahahah.

• Legislation passed by the Executive and Judicial branches of government
•  Corruption and greed on Wall Street
•  Americans living beyond our means
• Banks providing substantial home loans to Americans who were never in a position to afford that home

According to the United State Department of Labor, when comparing January 2008 to January 2009, the unemployment rate and the percent of the force that is unemployed rose from 7.6M to 11.6M and 4.9% to 7.6%, respectively.  That is an increase of 4.0M unemployed Americans and an increase of 2.3% in the *percent of the labor force that has become unemployed over the past year.  (Note as of August 2009 unemployment has increased to ~11.00.)

Please note these numbers do not depict an accurate picture of the unemployment crisis in America.  The statistics do not take into account the following.

• Americans working part-time who are unable to find full time work (~8.0M)
• Citizens who desire a job, however they are not actively seeking employment (~5.6 million)

Therefore, ~25 million Americans are unemployed.  Per our research there only an estimated 3 million job openings in America as of December 2008.

In addition to the unemployment pandemic in America, the stock market (in reference to the Dow) has dropped below 7,000 points.  This is the lowest it has been 11 years.   (Please note we have seen a great recovery in the market since this article was originally written.  The Dow is now over 9,500 points).

Side Note: The events that led to the downturn in our market and the events that are currently happening after our market started to decline are vary comparable to the events that led to the stock market crash of 1929 and the Great Depression. 

• After the stock market crash in 1929 the Dow did not hit its lowest point until October 1932 (~3 years).  The market declined 89% in a three year period.  Mortgageforeclosurereport.com compared the highest point in the Dow over the past three years and noted it occurred in October 2007.  Since this peak the market has decreased ~50% over the past year and a half.
• Real estate values peaked in the mid 1920s and as the real estate values started to decrease the stock market then crashed.  The correlation between peaking real estate values followed by a sharp decline in the Dow during the 1920s is similar to the real estate bubble that peaked in the 2000s followed by the rapid descent of the Dow.
• Economists debate whether political legislation that was passed by the government may have provided an avenue for the market to decrease significantly in both time periods.  In the 1920s economists argued whether the Smoot-Hawley Act contributed to the stock market crash.  In our current times economists are debating whether the Community Reinvestment Act revisions in 2002 made by the Clinton administration contributed to our current situation.
• Banks over extended themselves in both time periods
• When the media reported the stock market crash in the 1920s to the American public there was national spread panic.  This panic led to a decline in market confidence, which led to the crash of the Dow, which led to the Great Depression.  This same panic the American Media created in the 1920s is tenfold in the present.  This media is able to reach out to the American public and the rest of the world 24/7.

By looking at history we can learn some valuable lessons.  First, the past is the past and we have to move on and work towards improving the future.  Second, the worst may have yet to come.  Therefore, we need to take precautions and seek help from professionals.  Finally, there has to be a personal responsibility by each individual American to take care of him/herself and their families. 

Our website is not designed to debate who or what created the financial crisis in America, but rather give the reader a background of what is going on in our country.  Additionally, we want to help the public gain a basic understanding of loan modification, foreclosure, debt consolidation, and a short sale.   

*The percent of the labor force that is unemployed is calculated by the following calculation:

                                Number of Civilian ** Noninstitutional Population in the labor force   

                                Number of Unemployed Civilian ** Noninstitutional Population in the labor force

** Civilian Noninstitutional Population – All persons who are equal to or greater than 16 years of age (aka “working-age population”) and are not members of the armed forces or persons who reside in institutions such as a nursing home, jail, prison, mental hospital, and juvenile correctional facilities.