A Boomer Lifestyle Blog

Monday, March 29, 2010

CitiMorgage told me to Default on My Loan

This article from one of my favorite blogs, Wise Bread, says all there is to say about the housing - finance problems today. Only in the completely screwed-up world of the lending industry would this be a logical and serious piece of advice. But that’s basically what I was told after calling CitiMortgage to ask about help with my home loan. Like roughly 25% of homeowners in the USA, I find myself owing more for the house than it’s worth. Now, before I get people screaming at me for biting off more than I could chew, that’s not the case at all. We did everything right: bought a modest home within our means, didn't cash in on equity (when the house had equity) by refinancing, never missed a mortgage payment, ever. And now, some seven and a half years later, our modest little home, which we have completely grown out of, has an even more modest value. It’s lost 25% of it’s value in fact, and we now owe more than it’s worth. We can’t rent the home out without losing serious cash every month. That’s because we would have to charge rent based on what the house is worth. And that would leave us roughly $500 a month out of pocket on the mortgage. We can’t sell without taking a serious chunk of money with us to the closing table. We’re talking $20k-$30k, which is money we don’t have to spare. Not many people do these days. But if we did, would we want to completely wipe out our savings on a piece of property we were leaving behind? We can’t just stop paying and walk away. Trust me, I’ve never had a bad debt in my life, so I don’t want to start now. I was seriously considering it though. But in Colorado, the financial institution has every right to come after you for any money they lose on a property that’s been foreclosed on. We could not only lose our savings, but our cars, possessions, and everything else. This is called a deficiency judgment. Some states have it, some don’t. Mine has it, so it’s impossible for me to walk away from this money pit of a home without suffering some huge consequences. What about a short sale then? Well, it’s possible, but there are issues with that too. Short sales are notoriously difficult to arrange. We’d have to put our home on the market and get an offer. And after that, we’d have to hope the lender accepts the offer. If they don’t, we have to start again. This could take months or years. And the whole time, we’re sinking money into a house that continues to lose value. The whole “buy property, it’s a guaranteed investment” mantra is now just hot air. But what do we do? We’ve seriously outgrown the home, one which we bought as a single couple and now have two children. With no basement and a garage that’s bursting with stuff, we continue to give things away to charity, or just throw things out. Even with a regular spring clean, we're just running out of space. We decided to turn to CitiMortgage and see if they could help us. After all, a recent article about Bank Of America gave us hope. They’re now helping people like me out by reducing the principal owed on the property! That’s right, they’re actually slashing money off the books. Anyway, I went to CitiMortgage.com and filled out the form in the homeowner assistance section. I was delighted to see that, after putting in my information, we were indeed eligible for some help. I just had to submit some proof of earnings, which was no trouble at all. I then got a call from CitiMortgage a few days later, asking me to call them back and talk to a counselor! Excellent, I could see a glimmer of light at the end of a long tunnel. Then, the games of phone tag began. I called, was put on hold for 10 minutes, and the line went dead. I got a call back asking to call again. I did. I was put on hold for 10 minutes, then the line went dead. Argh! I was not happy. The third time I called, I finally got through to someone. As it turns out, there was actually no counselor assigned to me at all. No one was sitting behind a desk, filled with great information and some paperwork that could help me out. No, as it turns out, there really wasn’t much they could do, or rather, were willing to do for me. “I was told I had a counselor,” I said. The customer service rep, who clearly had no interest in me or my predicament, told me that no one was assigned to me and there’s really nothing they can do right now. “What about this Bank Of America program that’s out there right now, helping people who are upside down on their mortgage?” I asked. “Do you have plans to help in that way?” “No” was the cold and curt reply. I did a quick calculation in my head and realized I had given CitiMortgage over $100,000 in interest over the last 7 and a half years. Actually, way more than that. And all I had to show for it was a house that requires many thousands more dollars just to walk away from. If I had dropped $100,000 at a casino, I would be getting the red carpet treatment. If I dropped 100,000 bones on a new car, the salesmen would be breaking their backs bending over to help. But CitiMortgage? Sorry, no dice. Which I find odd, because my tax money, and yours, went to CitiMortgage in the form of billions of dollars of stimulus money. They received 1 billion dollars from the government, and their parent company CitiCorp got a whopping 45 billion dollars! “Is there ANYTHING you can do to help me?” I asked. I had read earlier that CitiMortgage was supposed to be helping homeowners ho are underwater, so I knew there must be something they could do. And that’s when this salient piece of advice came over the telephone. “We can’t help you unless you have defaulted on the loan for 90 days” was the almost robotic reply. Wait, did I hear that right? Is this lady telling me to stop paying my mortgage? Isn’t that some strange advice? I double-checked. “Are you telling me that there’s nothing you can do to help me out until I actually stop paying you?” “Yes” she said, “but even if you default there’s no real guarantee we can assist you.” “So, I could wreck my credit, have debt collectors calling day and night, risk being kicked out, and it could all be for nothing anyway?” I asked. “Yes.” So, that’s where I stand today, and I suspect many of you are in the same boat. Why, why, why would any financial institution want their customers to stop paying them? Why will they only help bad customers? Why is defaulting the only way to get help? Why are good payers being treated poorly, and people who can’t pay getting the royal treatment? I’m now finding myself in a position I never, ever thought I would be in. I’m considering just stopping the payments and putting the money in the bank. I figure the worst that can happen is that I just have to pay that money back to CitiMortgage at some point, but in the meantime it can sit and collect interest for me. If anyone out there works for CitiMortgage, or a similar lender, please let us all know why you won’t help people unless they stop paying you. And why the bailout money you received isn’t helping the loyal customers as well as the poor payers? I, for one, am just completely thrown by this whole situation. And, for the time being, I may be living in my small house and tripping over my things, but at least I’ll be doing it for free. Hey, not my suggestion. It was CitiMortgage’s idea. Those of us who squeaked by on the housing/finance front know that "pit in the stomach" feeling Wise Bread is going through. Because of the diabetes and the financial, not to mention, physical, problems it caused, I was more or less forced to sell my house. Had I not made the decision when I did what would have happened. If I had sold my house the year before I would have made a nice profit. If I had sold my house the year after - well who knows if I could have sold it. As it was, I got out in time. I no longer own a house and the obligations. On the other hand, I no longer own a house and the rewards of knowing someday it will be yours. I am so sorry for all you folks with this problem. It is cruel and so hard on the family. I don't mean to make light of the earthquake in Haiti or any of the other natural disasters we have seen recently, they are truly heartbreaking circumstances, but living with the day to day disaster caused by the financial-housing curse seems like a man-made (or sound I say an stockbroker-made) disaster that we can't find our way out of.

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