I filled out the forms that my lawyer (Craig) from southern California e-mailed me and then went to see another lawyer here in San Francisco $100).  He gave me some great advice, revised my forms and I just about had time to file the the forms before the clerks office closed at 4:00. I found my self in a line of professional filers.  They would go up to one of the two windows, and have a stack of 15 forms to file, and pay for. I can only surmise that these bike messenger types are professional filers, as they seem to know each other and are on a first name basis with the clerks. I think I was the only one in line just filing one document (my response to the Unlawful Detainer).  The clock was ticking and tried to be patient, but standing in line is not my thing.  Finally, at 3:50 (just 10 minutes before closing), for a fee of $205, I was able to file my document.

In this case I filed in “Pro Per” which means I was my own lawyer when I filed the response.  It was a good thing that I disrupted my whole day and was persistent in doing the filing, as the lawyers for Deutche Bank filed for default on the 31. I had to notify them by mail, so our letters must have crossed in the mail, because I got theirs a few days later.  However the court had not filled in the check box that said they would grant default, so we go to trial.

We also filed a civil suit against the bank for wrongful foreclosure. Our goal is to see if the judge will attach the two cases, rather than seeing them one at a time.  The reason for this is that if the judge just wants to try the UD case, then the trial will probably be the last Monday in April or the first Monday in May (these things are usually done from 9-12 am on Monday mornings in the San Francisco Superior Court).  UD cases are usually dealt with quickly, and the lawyer I consulted said that he had not one any of the 4 UD cases he had done in the last 6 months.

When I asked “why” his answer was that no judge wanted to stick his neck out and tell the bank they were wrong, that their impersonal and bulling tactics were wrong.  These judges are elected officials, so they don’t want to rock the boat too much, and in reality, no one really knows what to do about the foreclosure problem since the courts are now flooded with them.  Did you know that 80+% of those in foreclosure have never even talked to their bank?

This lawyer was able to get his client a stay (on the UD) as he was appealing the case to a higher court, I think the California Superior Court.  It would take some months for this case to be heard, and because these judges too were elected officials he did not expect to win there either.  However another stay for appeal, this time to the Court of Appeals (appointed judges not elected) where he might eventually win.  In the mean time his client gets to stay in the property.

Did I mention that in the UD suit against us the bank has asked for rent if the form of $100/day.  Now that is chutzpah!

If we are able to join the UD suit to the wrongful foreclosure suit, it takes most of a year for wrongful disclosure suits to be heard in San Francisco.  If we can’t get the two cases joined, then we could be thrown out of our house in a matter of days, and a year later could deal with the suit against the bank for wrongful disclosure.  Do you see how the system is very much stacked in the bank’s favor, and that nothing O’Bama has done is making any difference.  The banks have their processes and that is what they do.  They will not alter them just because 8 million people are in foreclosure. It is the greed of many of these banks, and of their executives that has put us into this financial crisis in the first place. Although the banks are regulated, it does not seem to be enough in this situation. If the government could force the bank to sit down with each case and work something out so the family could stay in the house, I believe the banks and the families in those houses would both be better.

Stay tuned by the end of April we should know more about what is going on with our house!

We have a second mortgage with National City. It started out as a credit line (which I got a credit card for), and is a HELOC which we warn against in Rules 12 and 14 in my new 42 Rules for Saving Your House from Foreclosure. Since I have not worked out my first mortgage loan modification with WaMu, there seems to be no sense in dealing with the second until that happens. But these people are relentless, and have an automated dialing system. When I don’t answer my phone they call 4-5 times a day. If I do answer my phone and explain the situation to them they call at least 2X a day anyway, like that will make things go faster.

On the surface PennyMac seems to be a good idea. Their goal is to keep people in their houses (which I applaud). However they started out their fund with hundreds of millions of dollars of cashed in Countrywide stock, because unlike the rest of us, they knew when to get out before the roof fell in. They are also getting money for PennyMac from some large investors. These are smart (and rich) guys, just not necessarily ethical ones. Mr. Kurland, now CEO of PennyMac, and his cronies are making millions from the home mortgage mess (a mess they helped to create).

How it works is that PennyMac recently they bought about $250 million in distressed loans from the FDIC (government) who acquired them from failed banks for about $40 million (about 17 cents on the dollar). This gives them a lot of latitude to do a loan modification, write down the loan, cut the interest rate and make the mortgage into something that the homeowner can support and keep paying month after month. It is a win-win situation. PennyMac gets a piece of whatever they can collect from the homeowner (20 - 40%) and the government gets the rest. The homeowner stays in their house, foreclosures go down, and the crashing economy moves on.

Here is an example of how this (legal) scam works. You have a loan for 400k that is in default with Bank “A”.
Penny Mac buys that bad loan for LITERALLY pennies on the dollar. They pay Bank “A” (10%) or 40k for that mortgage. Penny Mac then turns around and renegotiates with you, the homeowner to rewrite your 400k loan, which was at 7.5% interest toas little as 3%. Bank “A” gets rid of a bad loan, and makes 40k. Penny Mac makes 360k right off the top, before interest. You (the homeowner) are essentially happy you can stay in your home, but you never realize that it was Countrywide that sold you the bad loan in the first place, before it was repackaged and resold a dozen times between lenders.

However, the ethical side of this does not look so good. As one lawyer said ““It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies” Or in a column by op-ed writer Gail Collins: said in the New York Times that “It’s like Jeffrey Dahmer selling body parts to a clinic.” Or this, in a Times story by Eric Lipton: Or as another reporter from the New York Times put it a bit more graphically “It is like Jeffrey Dahmer selling body parts to a clinic.”

PennyMac hopes to achieve a profit of at least 20% annually (not bad in a recession economy), and it is actively courting other investors for another $750 million to build its portfolio, which now consists of $800 million in loans, to as much as $15 billion in the next 18 months. So in today’s economy what do you do when you are caught stealing billions of dollars like CountryWide did? Change your name and steal more, after all America is the land of opportunity.

I was not sure why they would pay our insurance unless they were establishing some kind of impound account for property taxes (which we are behind on) and homeowner’s insurance. I will have to do some investigating and call the tax people in SF to see if the taxes have been paid also.

I am not clear if this is a precursor to our getting a loan modification, or the bank taking over and selling the house? We have calls into WaMu to find out our status. It is kind of scary though to know that your mortgage company can highjack your homowners insurance ( although we are still the beneficiary of the policy), without a word to us.

All of you that came to the book signing on Sunday, we had a great time, sold lots of books, and I should be able to post some pictures from the party on this site in a few days.

This living from month to month is very stressfull. I can’t do anything with the house because I never know if I will be living here the next month or not. I hope this ordeal ends soon. It has been 18 months since I contacted the bank and let them know the mortgage rate had adjusted to unreasonable levels, and almost a year since I have paid my mortgage (not for lack of trying).

It seems that the banks are set up to do foreclosures but not Loan Modifications, so that is what they do, foreclosures. I read the other day that Chase Manhattan (which owns WaMu) has given back the money the government initially gave them so that they would not be encubered by the new government rules. Those banks that were not strong enough (and 10 were) are having the government limit executive pay, bonuses, etc. In one sense this is the right thing to do, but on the other hand, many of those executives will just jump ship to a less regulated bank where the salary and bonus structure is better.

This will leave the less talented running the banks that are weakest (not a good strategy). My prediction is that many of the banks that did not pass the government stress test will fail over the next year. So check to see if your bank is on this list. If so, your mortgage is likley to get sold to another institution.

http://www.forbes.com/2009/05/13/bills-collections-moneybuilder-personal-finance-bills.html?partner=alerts

Here is a long treste on the Credit Crisis, the Energy Crisis, and the Water Crisis

http://www.planck.org/downloads/Global-Resources-Analysis-Situation-2009.pdf

Here is an interesting article on how small business are using credit cards.

http://www.businessweek.com/smallbiz/content/aug2008/sb20080820_288348.htm

Another Forbes article warns of the credit contraction crisis

http://www.forbes.com/2009/05/13/meredith-whitney-consumer-markets-economy-credit.html?partner=alerts

The interesting thing is that using a credit card are not like a traditional loan where the terms are fixed. If you read the fine print, they CC company has the ability to raise your interest rate at any time for any reason. If you are late on payment once, it usually goes up 2-3%, late a few times and your rate is probably over 30 percent (we had one at 32.9%). Remember, 85% of CC are owned by the few largest banks.

However, in some circumstances a CC is necessary. Try to rent a car? Since I am not credit worthy, and every CC application I have submitted since my 2003 bankruptcy has been turned down (even though I got a mailing from Visa for their ultra special Black card ($495 yearly fee)), I decided to look for a CC for people who have bad credit.

The first law of bad credit is that there are lots of people out there that are looking forward to taking advantage of your bad situation to make theirs’ better. I good example are some of the CC offered to those who have bad credit. I read about one that gives you $250 of free credit to start off with, but read the fine print! After you have paid the initiation fee ($80), the processing fee ($70), the transaction fee($25), the one time membership fee ($70), there is pretty much nothing left of the original credit line they gave you and you have paid most of the $250 in fees without any CC benefit.

Look for CC with low or no fees. Consumer reports also looks at the best and worst CC. Here is what they say in their October 2008 press release

Another common scam for those that are credit starved is a pre-aproved card with a $7500 spending limit (LPC Universal Platimum). But when you look closer at the card, it is not a credit card but actually a merchant card or a shopping credit line, that only allows you to buy from a specific online site (if you want to spend the $7500 credit they are initially offering you). Here is what the site http://www.mylpcard.com says about this:

“As an LPC member card holder, you can shop for a collection of fantastic consumer products, ranging from jewelry and electronics, to furniture, house ware and fashion…all brought together in one place exclusively for you. This collection is made available exclusively to LPC Members, offering them a wide variety of shopping choices independent of any financing privileges.”

With the current economic situation don’t feel like there are NO options, there are always options, they just might not be GOOD options. It requires you to be smarter, more vigilent, and more carefull with what money you have than ever before.

Fortunately, President Obama is starting to address some of the abuses by the CC companies (very large campaign contributors for President Bush). He is even having a town hall meeting today in Colorado to address this specific situation. I am waiting to see what happens and am hoping that some of the CC abuses that are standard business practices now, will be curtailed by a government that seems to be no longer in the pocket of big business. More on this evolving crisis as it evolves.

I know there are what are called “deficiencies” in my bankruptcy application, and I have 15 days to rectify those or the case gets dropped. I asked my lawyer to send me a list (evidently there are a total of about 44 pages of documents that need to be filed, and I only have done about 10 pages. Isn’t beauracracy wonderfull? Without it where would people work?

Right now the lawyer is trying to negotiate with the bank about both the first and second mortgages. I will have to wait and see what happens, but have plenty to work on over the next 2 weeks.

What was even more frightening, is some guy showed up at our door a few hours ago, asking what we were going to do about our impending sale at 2:00 (it is public record). Here is another person wanting to make money on my misery, something I warn about in one of the rules in my book. In any case we told him that it was being handled by a lawyer and he went away.

1- File a completed application with WaMu. We have been trying to do that for 18 months. This week has been an exercise in frustration. On Tuesday we gave them a letter letting them know we filed an extenion for out 2008 tax return (and in truth, Jennie was not going to do it until October). Unfortunatley, they did not accept our letter and said that without the tax return the application was incomplete and the sale would happen on Monday. So, with Jennie sick with both the flu and bronchitis she had to go to our CPA’s office in San Rafael (he is on vacation until well after the sale date for our house) and get the extension which we sent into WaMu on Wednesday.

Then yesterday they come back to us saying that the extension is not good enough and if we wanted to qualify for the Obama plan, they needed our full 2008 tax return. So again, while sick, with a fever, Jennie had to go to San Rafael and produce our 2008 tax return, which we submitted yesterday. I expect that today they will come back with something else that will make our application incomplete and have the sale happen on Monday. I am not clear that the bank wants anything but to foreclose on our house, so I have to look for other options.

2- Our lawyer is trying to negotiate with WaMu to see if we can pay 10% of what we owe to reinstate our loan, no word on that yet, and it would only be a temporary stay (for a month).

3- We are looking at filing for bankruptcy, an emergency stay, would postpone the sale of the house by the bank. This is the last and worse option, as the court could say that we can’t afford to live in the house and either make us sell it or take it and sell it. Either way we are homeless. Plus, I would have to file the bankruptcy myself on Monday or this afternoon “in pro per” (without a lawyer). I am told is only $300 in fees and that I would need to file it at the federal court house.

So I expect it to be a frantic Friday, with all of this house stuff to do, on top of a full time job I am already working. I guess it can’t go on much longer (and either can I) and we should know by Monday if we have a house or not. We don’t have too many options left. I spent most of a sleepless night alternating between wondering if there was anything else I could do, and my anger and frustration over the situation, and how I could turn that against anyone who does get the house (despite my best efforts). Not a bright future, but one can only hope something will work out, there are forces here that are out of my control, and I can only do my best.

On the upside I have a call with my editor about plans for the book launch today, so the book should be out if a few weeks. I am also looking at having a book signing party and wine tasting in the middle of June. At least I can celebrate the completion of that project.