What are banks, loan companies and the government going to do with 180,000 foreclosed homes?

Some of them are getting sold off, and many of them are simply sitting and rotting. Detroit has a unique idea, they are bulldozing the houses and opening the area for crops.

Here is our area, large unfinished housing developments are just sitting until they fall down, or get burned down, and individual houses are torn down by the city when they get in bad enough condition. Empty fields take their place.

180,000? Surely the number of homes in foreclosure or default is greater than that?

YarnLady, this is really a sad state of affairs for Americans. Its not suppose to be this way in the land of the free. I wonder what is next coming down the highway for us?

Geeky mama, that was the last figure i saw about two weeks ago.

@geeky_mama One estimate published this month expects the number of foreclosures in the U. S. to top 100,000 in the month of January alone.

@john65pennington – back in 2008 that number was more like a one million homes (see CNN link)

And Bloomberg reports that economists expect the housing market crisis to peak this year (2011)—they are expecting a 20% jump from last year’s record of 2.87 million properties getting notices of default, auction or repossession (see link)

So..perhaps the number you’re referring to is a monthly number of homes going into foreclosure?

@john65pennington Perhaps you haven’t visited a ghost town such as Bodie, California, or driven down an abandoned highway, such as Highway 66 and seen the mile after mile of abandoned buildings

This is an old American tradition.

OK..apologies in advance. This is going to be a lengthy reply…because your question has struck a chord. This is a topic near & dear to my heart…as you’ll see.

FWIW, my family and I may be among those who default on their home loans this year. We bought a home just before the housing market crashed and the home has literally lost half it’s value. No exaggeration. (Even the city’s tax valuation for the home is half the amount of what we paid/mortgaged 4 yrs ago.)

My husband lost his job 3 times in the 4 years we’ve lived here and so far we have just barely made it..We’re talking skin-of-our-teeth-can’t-pinch-the-dang-penny-tighter-belt-tightening.

The house payment is the killer, really. It’s taking half of our (dual) income. We bought this house when my husband had a far more lucrative job (4 jobs ago)- and we’re still making far less (like nearly $90K less) per year than we were 4 years ago when we budgeted for this house payment.

If we walked away from this house we’d have no problem paying back all our other debts..and if we stay, even if we stay for the next 30 years, I am sincerely concerned we would have no hope of recovering financially. Or paying for things like our children’s orthodontia and college.

We have an appointment in late Feb. with our trusted Financial Advisor/Accountant and will talk to him about our financial options…but we suspect our best move would be to walk away from the house…which is heart-breaking and scary.

We love this house. Our kids love our house. We did not buy some mansion—we bought a 27 year old family rambler with just enough space for our 4 (sometimes 5) kids. We’ve had to replace the roof, furnace, water heater and all appliances but the fridge and washing machine so far. Not counting all the other repairs and maintenance and tons of sweat-equity we’ve put in. (Though, it’s all negative equity despite the sweat..and new appliances..)

Now the house needs new windows (they are literally rotting out of the frames)..and we don’t have a chance of being able to afford them.

We’re not financial idiots, we have always budgeted – but our careful savings & emergency funds were exhausted after his 2nd round on unemployment.

If our mortgage company would consider a loan adjustment or even would agree to a short sale we’d be able to avoid foreclosure—but they aren’t willing and they won’t even talk to you about options until you have stopped paying your payments and fallen so far behind that you owe them thousands and thousands of dollars in fees.

I wish there was a bail out for average folks like us – rather than the institutions who are still making profits and paying their CEOs huge bonuses.
But, if wishes were horses…

I digress. To answer your question: What will the mortgage company do with this house if it’s foreclosed? Well, based on the other dozen or so homes near us that have foreclosed I can tell you:
1. Not much! They won’t invest one red cent in the house. They will rack up fees and assessments from the city because they will fail to mow the grass. In fact, they’ll probably be so stupid as to fail to run the sprinkler system (free water! it’s well-water) and wreck the lawn permanently causing whoever buys the house to have to completely replace the sod.
2. The house will likely sit in disrepair until someone comes along and pays FAR less for it than what I’d be willing to pay if the mortgage company would only just consider a loan modification. They’ll probably get less than half of the loan back – because even in perfect condition this house isn’t worth half of the value of the current loan.
3. The house will sit vacant for months, perhaps years. In our neighborhood the average time the house sits empty (unmowed, uncared for – just a “For Sale” sign plunked into the front yard) is around 9 to 12 months.

Our local city goverment will add our home address to the list of foreclosed homes and ask our already overtaxed Sheriff’s office to do occasional drive-bys to make sure no one has taken out all the copper pipes or broken out all the windows.. but that’s the extent of what they can do with their own slashed budgets.

And as for us…
I’ll avoid this street like the plague out of humiliation, sadness and memories of what could have been. I’ll worry about how this will affect my kids..I’ll worry about how we can ever repair our (previously perfect) credit score.

But..then..this is just what I expect will come to fruition. Unless something magical happens for our family income early in 2011.

There will be way more than that before it’s over!

@geeky_mama; unless you live in Nevada or another state where they can come after your other assets, I would list the house for a short sale and stop making payments. This will give you a chance to start paying down your other debts. The biggest risk you run is that they see your other debts being paid down and don’t approve your short sale. If that’s the case they will just foreclose, which is what your considering anyway.
I have a friend who hasn’t made a payment in 3 years but they haven’t foreclosed because she is taking care of the property. They have so many bad loans in her neighborhood that they would end up owning complete blight if they foreclosed on all of them.

@Judi – Your advice sounds very close to what we’re considering.
Our understanding about short sales (the house next door had a short sale) is that we’ll need the agreement of the mortgage company to sell via a short sale. (They have to agree to accept the sale price and not come after us for the balance of the mortgage.)
Considering the difference between what the house would get at a short sale vs. what is owed on the loan is so great ($165,000 or more), we’ve heard from a few real estate folks we’re unlikely to get the cooperation of our lender to do a short sale. But hey, who knows..until we really stop paying them.

My husband’s ex-wife was actually renting a home in our area that was in foreclosure. It took a full 22 months before the bank finally truly foreclosed / took the house. So, for over 18 months she lived and paid rent to the (former) owners (who were NOT paying house payments)..who had moved to a new home.
They apparently had enough advance warning that they were able to come and strip all the appliances out of the house just before the bank took it. I’m torn between being repulsed by their profiting on renting to her and shaking my head at their savvy recovery from foreclosure.

I don’t think we’d go that route (can’t imagine renting it out..telling someone: “hey, let’s just go month to month until the bank changes the locks!”)..but I can imagine living in the house and taking care of it until the bank takes it..because I’d hate to see it fall into disrepair.
It’s against every cell in my body to not pay a bill on time..and so I’m not sure I could stomach staying there and not paying the payments.. but if we end up with at least a year where we could be paying down our other debts and building up savings..that would help us tremendously.

@geeky_mama, what state are you in? In California (unless it a HELOC) they can’t do more than take it back. If you have a second, it may very well be a HELOC but they will usually negotiate that down to a small percent of the total and take a promissory note.

My advice is to have a long discussion with the loan officer that handles your account. Don’t settle for the first clerk you get on the phone – and follow up with detailed written correspondence. Tell them everything you have told us, and provide a detailed payment plan. If possible – show how lowering your payment and extending the duration period of your loan will allow you to pay them back without any hassle.

@YARNLADY; that would work if the banks were reasonable. They are nuts. Doubly bad if it’s B of A. They really don’t care about your “story” and no one is really empowered to make decisions. Even attorneys can’t contact the decision makers. Even in a short dale it all comes down to the decision of some annymous “investor” whos identity they refuse to disclose.

@Judi – we’re in MN. We do have a second mortgage.
We bought with an 80/20 (a loan product which I’ll bet is no longer offered these days) because we bought and moved before our previous home sold.

From what I’ve learned so far, we’re unlikely to get the two banks to work together and we’re likely to be stuck with that 2nd mortgage loan unless we declare bankruptcy.

The larger (‘80’) mortgage is with CitiMortgage. I find them to be better to deal with than B of A or Wells Fargo…but still, they are large and heartless and our local newspaper is filled with recent stories of how they (and other lenders, to be fair..but CitiMortgage was named specifically) offered “temporary” loan adjustments (based on the Obama bail out money they received) for struggling home owners and then backed them out after 6 months (or less) and slapped literally 10s of thousands of dollars of fees on top. If the homeowner didn’t pay the hefty back payments + fees immediately – foreclosure was immediate. It sounds really evil..like a way to actually profit AND also inflate their numbers to the gov’t saying: “Oh yes, we offered over 1,000 loan modifications in December..” (but not mentioning that just a few months later they deemed the home owner didn’t qualify for a “permanent” modification and that they slapped on HUGE fees & back payments of the temporarily downward adjusted payments).

Here’s the link to the story: It specifically calls out Chase Mortgage and CitiMortgage..but I’m sure other lenders have figured out this way to squeeze struggling homeowners, too.

I’m about to find out. Just got divorced and ex-wife is still living in the house (and seemingly without a problem with the shame she has brought on herself, but that’s for another question) without making any mortgage payments. House is worth about 75% or less of what we paid for it and we owe 100%. We’ve missed three payments and the first and second mortgage holders call daily.

She is moving out supposedly moving out at the end of the school year. I am considering moving back in, before they lock the doors, but it will only remind me of what I lost (definitly another queston).

How long do you think I can stay before they lock the doors on me?

I think we are going to lose our house too. I’ve been out of work since October, can’t get unemployment, and fast food/low entry places aren’t looking for a guy with an English degree.

We have applied for the loan mod., but it is with Chase, so after reading that article, we are probably better off staying here till we get kicked out and after again reading that article, my chances of a short sale seem nill.

Part of the problem is that I live in a town where the economy seems even more repressed than the avg. (spokane, wa) and the jobs that are available are min. wage jobs that are looking for people with no qualifications at all that won’t bolt at the first sign of an improved economy.

I’m also trying to apply to a grad school to eventually go to, so I’m torn between trying my damnedest to get into a school that allows me to stay here in the hopes of everything eventually working out or just bolting for a change of scenery. The idea of moving brings out the venom in my wife, who will probably resent me forever because of this mess, even though there’s just not a thing either one of us could do about it. Also, the grad school part of the equation is not the reason I am not getting hired, because I’m not telling a thing about it in hopes that eventually I will land a job.

@captainsmooth , a person my wife works with (a pharmacist) is received their foreclosure notice 6 or 7 months ago and they haven’t done or said anything to them yet.

When my bank would not consider any loan modification and the house lost half it’s value, I said screw you! I stopped making payments, did not pay the taxes or insurance, moved out and rented the place. It’s been two years of steady rent to me and I’ve since gotten my equity out of the house. The bank had to pay the taxes and insurance or lose the place to the government. I love it when the tables get turned…

they got them self into the mess so maybe they will get them self out if people did not live above what they can afford they would not have got in the boat in the first place

Excuse me @georgia_girl1967 , I could afford my home. Very well for 7 years in fact. Some people can’t help things if their job is taken away and no one will hire them. Good day.