Kirby on Finance

Faith Groups Fight Banks on Foreclosures

With recent data stating that U.S. foreclosure filings surged 71 percent in the third quarter from a year earlier, to the highest on record, it’s clear that we have yet to hit the bottom of the nation’s housing troubles. With daily headlines letting us know that the government is bailing out another company for billions it’s easy to forget that there are REAL people out there who are, rightly or wrongly, losing their homes.

I was reading an article in Bloomberg and you might be a bit stunned as I was by a quote they included in the article:

“Every time I call them they say they can’t help,” said Flores, 31, a graphic designer and bartender in Contra Costa County, California, where one in every 146 homes is in foreclosure. “They tell you the solution is that they take Visa or MasterCard.”

What a loaded sentence! First off, Flores works two jobs, so I naturally want to root for him to be able to keep his home. But that wasn’t the real grabber in that paragraph - look at what the bank told him when he asked for help - “They tell you the solution is they take Visa or MasterCard.” Really? That’s akin to asking an alcoholic to buy each of you a shot of liquor because you bought him a shot a couple weeks ago.

Don’t flame me for getting upset at a business that is just trying to get an individual to live up to their end of the bargain. I understand the necessity of making money and I understand that from the bank’s perspective, they just want to get paid - how they get paid isn’t their concern. What does bother me is the sheer lack of concern about the greater problem that many of these banks have created.

Naturally, most problems are created through a conspiracy of mistakes and dumb decisions. There’s a good chance Flores purchased a home that he probably couldn’t afford. But, I guarantee you there were a plethora of banks willing to make him a loan that they knew he couldn’t afford to capitalize on his mistake. They did so knowing that they could easily package the loan and sell it off to investors, therefore absolving themselves of the mistake they helped Flores made.

I keep asking myself, why did the banks fail to realize that while they are citizens of their community in addition to being citizens of their corporation? I know they chiefly owe a duty to their shareholders, but what about a sense of decency to their common man? While it’s obvious we can’t expect that from them, thankfully others are willing to help:

Now Flores has a new ally: the Antioch, California-based Contra Costa Interfaith Supporting Community Organization, one of a growing number of religious and community groups pushing lenders to renegotiate troubled loans so owners can stay in their homes.

Still, more homeowners are turning to groups such as the Contra Costa organization for help in the early stages of mortgage problems, before they result in foreclosures. An affiliated group called the PICO National Network, based in Oakland, California, says it is working with hundreds of families in Contra Costa County and plans to help as many as a million homeowners nationwide.

PICO, short for People Improving Their Communities Through Organizing, is kicking off a national tour tonight in Flores’s hometown of Antioch, where 500 clergy and community leaders are due to meet with representatives from Wells Fargo & Co., Bank of America Corp. and the Federal Deposit Insurance Corp.

The group says it will then move to Kansas City and three other cities before traveling to Washington for a meeting with House Financial Services Committee Chairman Barney Frank. Washington Mutual Inc., now part of JPMorgan Chase & Co., and Wachovia Corp. are other lenders the group is trying to sway.

“It’s a local issue in terms of impact on families and communities but this needs a national response,” said Tim Lilienthal, PICO’s communications coordinator. “We need to move from a case-by-case way of doing things to a more systematic approach.”

PICO has 20 local affiliates in California. Other faith- based groups like the Gold Cross of America in Deltona, Florida, are offering assistance to homeowners as they negotiate with mortgage companies.

I’m glad there are organizations like those who are willing to help homeowners but it’s a shame that they’re even necessary.

For more information:

• PCIO National Network
• Gold Cross of America, Inc.

California Faith Groups Fight Banks on Foreclosures [Bloomberg.com]

Home Improvement 2.0

The modus operandi of the housing market the past few years has been to buy a home and let the ever-surging housing market carry you into a nice profit when you go to sell the home. Because the market has cooled in many area’s, it’s important to squeeze every little bit of potential value out of your home before you put it on the market. This used to just mean remodeling in some form or fashion. That still works, but data has shown that in the past few years the cost of remodeling has increased, while the return (in higher home value) has decreased. That means that as a homeowner/investor, you must turn to some other less obvious ways to pull extra value out of a property. BusinessWeek outlined three key areas to doing so, and I’d like to share them with you.

First, know the quality of your neighbors homes. It seems intuitive to just put the highest quality upgrades into your home in hopes that they’ll drive prospectors to by the home. This is partially true, but you don’t want to price yourself into being the best house in a bad neighborhood. That may just mean waste for you in terms of return on your improvement dollar.

“You want to make sure you can turn apples into apples before you make any improvements,” says Sid Davis, author of Home Makeovers That Sell: Quick And Easy Ways to Get the Highest Possible Price. “If you put in granite countertops and everyone else has laminate, your house could end up overpriced.”

Second, do it yourself! When you do make improvements, you can save a tremendous amount (thus increasing the return on your improvement dollar) by doing it yourself. While difficult, a lot of the home improvement projects that can make a difference don’t involve rocket science and can save you a ton over hiring a professional to do it.

For the handier among us, tiling can be an amusing way to perk up the kitchen or bathroom. Discontinued tile can cost as little as $1.50 per square foot, and stores such as Home Depot and Lowes even offer tiling classes. Refinishing kitchen cabinets is also much easier than you might think. Sand, apply a lighter stain or finish (this will make the kitchen seem bigger), and replace old knobs and handles with new stylish ones.

Lastly, don’t just remodel for the sake of doing so. Do your homework and make sure that what you’re doing is going to offer the type of return you expect and whether or not it’s the type of addition that will grab the eye of a buyer in your market.

A good agent can spot buyer turnoffs, advise you what to improve, and figure out your home’s true worth based on the local market. If you have made all the necessary improvements and you still don’t like what you hear, simply wait for the storm to pass, and in the meantime, enjoy the fruits of your labor.

How to Make Your Home Worth More in 2007 [BusinessWeek.com]