Some homeowners have found that the recession has meant that the value of their home was less than the amount of the mortgage. So a few of them have packed up and left the homes, abandoning them and their obligations to pay the mortgages.
I believe a person's word is his bond; the homeowners who do this are reneging on their promises to pay. Walking away from this promise is not a moral thing to do unless there is no other option. Second, the damage to the homeowner's credit rating can be a long-time and sometime disastrous result.
Third, there can be other reasons not to abandon ship, as the following story illustrates:
Michelle Diamant, columnist for the AARP Bulletin, reported the case of Archie Stewart of Cleveland. Ms. Stewart owned a home for 25 years, then hard times hit her and she found she could not make the mortgage payments. The bank started foreclosure proceedings She felt defeated, and decided to walk away from her home.
Now, many months later, she has found out that the bank never completed the foreclosure, which leaves her with title to the property and still obligated to pay the mortgage. She is 62 and on Social Security. She applied for subsidized housing. It was refused because she owns a home!
To top off her misery, the home was vandalized and is considered a public nuisance. No one else wants the property. Ms. Stewart says, "I want them to give me my name back."
My point here is that homeowners should not abandon their homes until they are forced to do so.
In these hard economic times both the homeowners and the banks (or insurance companies) should do everything they can to avoid foreclosure. Then, even if there is no recourse, and the bank decides there is nothing they can do except foreclose, still, the bank and the homeowner can make agreements; such as, both agreeing that the homeowner stay in the property until a buyer is found -- to protect its value.
Thus, the homeowner will have, in effect, free rent; and the bank will have protection from vandalism. There are may ways that a homeowner and a bank can work out agreements.
Not only that, but a new North Carolina law, the N.C. Consumer Economic Protection Act Of 2009 (CEPA), is now in effect. It will help homeowners facing foreclosure, and protect them from unfair debt collectors. The law makes it easier for homeowners to work out a deal that will avoid foreclosures.
Foreclosures are bad for everyone. They are not only bad for the homeowner, but banks lose approximately 40 percent of the loan value. The community also loses, as homes become dilapidated.
CEPA authorizes the Clerk of Court to ask what steps have been taken to prevent foreclosure and to delay the hearing up to 60 days to allow the parties to negotiate a solution.
If the foreclosure is approved, the homeowner has the right to appeal. The law sets the amount of appeal bond at 1 percent of the balance of the loan. Before the law was passed, some courts required a bond worth the whole balance of the loan.
CEPA also protects homeowners from unfair debt collection. There are companies that buy old mortgages and notes and file lawsuits to collect on them. In some cases, the debts already have been settled. Now debt buyers must prove that they have the right to enforce the debt, and they must verify the amount owed.
Homeowners who are in financial trouble and cannot pay their mortgage payments can find help from several sources. One of them is the N.C. Attorney General's Consumer Protection Division at www.ncdoj.gov.
Stanley Peele serves as an emergency judge throughout the state. Readers can contact him at chh@heraldsun.com or c/o The Chapel Hill Herald, 106 Mallette St., Chapel Hill, NC 27516.
