Mike Mueller, Social Media.ist

If you are a parent you already know they have "issues". 

• Mt. Diablo schools admit budget errors
• Mt. Diablo benefits fall victim to budget

If you've been to a board meeting (to voice your opinion) you probably came away disappointed.  So what's a Concerned Parent to do?

If you read the Clayton Pioneer yesterday, the answer was Front Page News!

Catherine Myers, a concerned parent (who also happens to also be a busy Real Estate Agent for Alain Pinel and a Blogger), somehow found the free time to organize an informal meeting.  She managed to bring together some of the Board Members and 50 or so Parents. 

From the article:

"On April 12, a group of almost 50 parents and teachers informally met with MDUSD board members Paul Strange and Gary Eberhart at Rocco's in Walnut Creek. The purpose of the meeting was to allow parents to ask questions of the two board members. Earlier in the year, the two called for the resignation of Superintendent Gary McHenry. They believe that public confidence needed to be addressed and was not being handled properly at the district-sponsored community meetings."

The meeting had been arranged by Clayton parent Catherine Myers as a way for parents to avoid the sense of defensiveness they had felt at the district meetings - which they believed did not allow for a casual exchange.

"There are serious fiscal concerns," she said. "There appears to be a culture of non-cooperation and low morale that needs to be addressed."

The meeting, scheduled to last 90 minutes, wound up lasting almost 3 1/2 hours. A few parents had questions answered for an additional 45 minutes.

When one of the Board Members comes away from a 3 hour grilling and says something like this...

"the best meeting I have ever been involved with," Eberhart called it "a community forum in its purest form. It felt good to listen to the questions and give answers."

You know you did something right!  Great Job Catherine!

If you missed the last meeting - you have another chance!

"This Saturday (4/26), with two of the other three board members we've not heard from yet in an informal forum.  April Treece and Dick Allen will be at Rocco's starting at 9:30am to answer questions, and certainly I'd like to know their take on last night's exchange.  You can see more info on this and other meetings and information at http://mdusdparents.blogspot.com"

Be a part of the solution - I'll see you on Saturday!

Hopefully not my last.

Why the hockey post today?  Just because the San Jose Sharks beat the Calgary Flames in Game 7 and move on towards the greatest trophy in all sports, The Stanley Cup!

That's why.  (That and I have a Hockey Hangover, eh?)

For you non Hockey speaking readers here's what the cup looks like:

A quick Hockey Primer for you:

• 30 Teams compete during the season to be one of the 16 that enter the playoffs.
• 8 teams in the East, 8 teams in the West.
• Teams play the best of 7 in a series.  No Ties. 
• There are 4 Series or rounds in the playoffs;
  1. Conference Quarterfinals 
  2. Conference Semifinals 
  3. Conference Finals
  4. Stanley Cup Finals
• Lose 4 in a series and you're "playing golf".
• Win 16 Games in the Playoffs and you  "Hoist the Cup!"

The Conference Quarterfinals ended last night.  We're now down to 8 teams.

In the East

The Montreal Canadians will play the Philadelphia Flyers

and the Pittsburgh Penguins will play the New York Rangers

In the West

the Detroit Red Wings will play the Colorado Avalanche

and the San Jose Sharks will play the Dallas Stars

If you are graphical in nature here's a quick little Bracket I made for my computer desktop.

Ok, that's enough Hockey for now.  I have to get back to work.

Go Sharks!

We've all heard of PMI.  It's Mortgage Insurance. 
It reduces the risk of loss to the lender in the case of default. 

In the case of default instead of the lender taking the entire loss, the purchased Mortgage Insurance steps in and covers a portion of the loss.

Who pays for the premium on mortgage insurance. 

Normally it's the borrower.

BUT WHAT IF...

What if the lender, unbeknownst to anyone, quietly purchased Mortgage Insurance to protect their position, to hedge their bets?

Take the case of a lender who's issuing Home Equity Lines of Credit or Seconds on riskier borrowers.  High Loan to Value? Stated Income?  No Problem! 

They bumped the rate just a little higher to cover the cost of a policy after the deal was closed. 

• This wouldn't show up in Title. 
• The Borrower would never know. 
• The Mortgage Broker wouldn't know.  
• Only the Lender would know.

FLASH FORWARD

Today that homeowner is in trouble.  They are behind in payments.  They owe more than what they can sell for.  They are underwater, they've been struggling for months, they want to do the right thing  and a Short Sale is the best option.

The house is listed, the offers come in.  There's a $100,000 deficiency and we're asking the 2nd lender to absorb the greatest portion of the loss.  Why not.  If it goes through foreclosure they'll receive virtually nothing.  Right?

"Hi Mr. 2nd Lender,  I know you lent them $125,000 on a home equity loan a couple of years ago.  You know they are behind, you've read their hardship letter.  I've negotiated with the 1st Lender and they'll give $10,000 to settle.  How about it?  That's a whole lot better than zero.  What do you say?  Do we have a deal?"

SILENCE IS GOLDEN

Mr. 2nd Lender doesn't respond.  Or they turn down the offer.  Or they lose the package repeatedly.  Or any one of the thousand complaints we hear on a daily basis about dealing with loss Mitigation.

Might this be because Mr. 2nd. Lender holds a policy on the loan?  Does that policy have a stipulation that only pays if the home is sold through foreclosure? 

Instead of a 90 something percent loss, the lender (with the help of his insurance policy) will lose  substantially less.  Very much less! 

This cost the lender nothing - the bump in rate paid for the premiums. 

Unfortunately, it cost the other players plenty.  The Listing Agent, the Negotiator, the Buyers Agent, the Buyer, the Escrow Officer, and the Homeowner.

I know this isn't as exciting as Black Helicopters, Elvis, Reverse Alien Technology, Grassy Knolls, or Space Shuttles and Earthquakes.

Hey Scully, what do you think?

Mike "Spooky" Mueller

Cattle, Sheep. Goats, go ahead and pick your favorite.  You are a now a piece of livestock in the eyes of Fannie Mae and Freddie Mac.

And you thought you were just another number?

As the pressure mounts for more and more homeowners, it's no surprise that  Foreclosure Rates have risen.

Yesterday, Bloomberg News reported that,

"U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders."

From the mouths of Lenders (thanks to Calculated Risk),

Don Truslow, Wachovia Corporation - SEVP, Chief Risk Officer

"Ken, that's exactly right. And Kevin, it's just this pattern almost that somewhere -- I don't know where the tipping point is, but somewhere when a borrower crosses the 100% loan to value, somewhere north of that and they presumably run into some sort of cash flow bump, whether it's reduced income or kind of normal things in life that have created past dues before,  their propensity to just default and stop paying their mortgage rises dramatically and I mean really accelerates up and it's almost regardless of how they scored, say, on FICO or other kinds of character, credit characteristics."

Dowd Ritter, Regions Financial Corp. - CEO & President:

"I would tell you that in a few of those that you saw us basically write off, we did not write them down, and because some of those -- they did have firsts, but there are cases where people as early as 18 to 24 months ago had one value on that property, and as they started to sell it or refinance it, they realize that valuation was 40% below what it was 18 to 24 months ago, and they're walking away from those homes in those markets."

What we're talking about is a

Realized Fear of Herd Mentality

Make no mistake, the lenders are worried.  This has moved up the food chain to Fannie Mae and Freddie Mac who came out with new guidelines for those wishing to finance in the future with a Foreclosure on their record.

As more and more people "walk away" from their homes, it becomes easier for the next person to make the same decision.

Herd Mentality

Cutting to the chase (a herding term) Fannie is saying to homeowners,

If you Walk Away today we're going to punish you tomorrow.  We will now prohibit foreclosed borrowers from getting another mortgage for Five Years!

And even after that five year period is up, we're going to require you come in with at least 10% down. 

Oh and we want you to have a really good credit score too.  Better have better than a 680 FICO."

Five years isn't so long is it?  Doesn't a foreclosure drop off your credit after a few years?

Foreclosure is Forever. 

Remember, on the loan application is a cute little box for you to check Yes or No.

Check the YES Box and your loan application jumps out of the Automated Underwriting line (easier approval process) and is pulled into the black hole that sometimes is Manual Underwriting.

This makes it all that much more important for homeowners in trouble to fully examine all their options.  For instance, by going through the "hassle" of a Short Sale, you'll avoid the Foreclosure Label.

I see that as a big positive in an otherwise negative situation.  "I'm never going to own a home again!"

Who knows what the future holds?  What if Grandma passes away and gives you her home?  What if she had a reverse mortgage on that bungalow?  Now what are you going to do?

By the way:  Not checking the Yes box (with a foreclosure in your distant past) is grounds for Fraud. 

"Mommy, why are they taking Daddy away?"

"Daddy was a very bad man, he checked the wrong box!"

Here's what a blank form looks like.  In a Short Sale or Foreclosure this is what the Lender might chose to file (a foreclosure might send you a 1099-A too). 

Like any other 1099, one copy goes to the taxpayer (you) and another copy goes to the IRS. 

(click to enlarge)

The most important box is

 

Box Number 2:  Amount of Debt Canceled

This is not your loan balance.  It's your loan balance, plus every single little nit picking fee the Lender can tack on.  Add penalty and fees too!  

In a Foreclosure, these fees and charges are pretty much left unchecked by anyone from the homeowner's side. 

In a Short Sale, either the Listing Agent or a Negotiator can help negotiate a reduction of these charges.  In fact everything in a Short Sale is negotiable including the very issuance of this 1099.

Remember, the Lender is reporting this to both you and the IRS as "income".  While you may or may not fall under the protection of the Mortgage Forgiveness Debt Relief Act (HR 3648), there is also the State tax consequences to be considered.

When I hear homeowners who say they don't care about a short sale, "just let it go to foreclosure",  because they are not going to gain anything from it - this is one of the first gains I think they don't see.

I can see that.  If you didn't receive a 1099-C, because you completed a short sale and your Negotiator minimized Box 2 or negated the issuance of the 1099 all together, would you notice? 

Maybe not. 

But I can say, TurboTax (or your tax professional) would notice more if they didn't.

I can't say I like the Mortgage people who are there right now. 

Look out!

Here Comes a RANT....

Case in Point: 

Here's a wonderful piece of  trash.  This was a quote request where the Walnut Creek homeowner was looking for a real rate quote on a 30 yr. fixed mortgage.

This bucket of loan officer scum (not harsh enough) used the platform to spam this homeowner on his companies biggest profit producing product.   The Home Ownership Accelerator.

or if you like a little outside reading, here's 100,000 pages on the topic

Let's look a little deeper into his profile...

As Borat would say, "very nice!"

Brent is a Quote Farmer.  

He's a Scammer, a Spammer, a Liar and Cheat.  He and so many others like him, are the reason my industry holds such a poor image in the public eye today.

Chances are he has hired people to blast out as many un-quotes a day as possible.

Brent isn't alone.  Right now, Zillow is crawling with Bait and Switch Artists.

Some look like they are a single person (like Brent) but are in fact a corporation.  If enough people complain about Brent, they just replace Brent with John.  When John is retired they have Pete, and so on.

I know I'm being harsh on Brent.  I'm pissed as hell (pardon my language) that Zillow is going to allow Brent and the others to continue.  And they will. 

They believe it's up to the consumer to decipher the difference.  I hope they do.  In the end, Zillow will be just fine.  Just like bad sellers on eBay haven't brought down that system.

Ok, I'm done Ranting.  Back to work.