While the world has been going to hell in a hand basket, I've been moving. Hence my month-long hiatus from Bilerico posting. On April 30, after weeks of packing personal and business effects, escrow closed on the short sale of the West L.A. house where my business partner and I had operated Wildcat Press for 14 years. While Tyler and his partner moved to a nearby apartment, I moved to a private-home rental in Glendale, in the San Fernando Valley. We will continue operating the LLC from two separate, smaller offices, and have already resumed business as usual.
As I packed, I was unable to boo-hoo about our personal fate. The fact is, we have lots of company. Millions, in fact. For two years now, a nationwide fiscal massacre has been underway, as the lending industry refuses to help most homeowners who are underwater on their mortgages. President Obama and his soft-on-big-business administration are letting the lending industry get away with murder (as did President Bush and HIS soft-on-big-business administration)
Through it all, I've wondered how many other LGBT people have been put through the mortgage meatgrinder. Meaning a short sale -- or that scary alternative, foreclosure and a sheriff's sale. It's eerie to see that the LGBT media and activist orgs have so little to say about this important subject. Why don't they pay more attention? After all, the mortgage meltdown affects not only our LGBT personal welfare, but also our collective LGBT ability to create vibrant local demographics -- to run strong community businesses and (most important) support vital political causes.
By 2008, thanks to lender greed, fully 80 percent of all U.S. mortgages were the blood-sucking sub-prime adjustable-rate (ARM) variety. Lenders knew exactly what they were doing. Many homeowners had been desperate to make up for decreasing income and cover rising costs of living, education, healthcare, running a small business. They rushed to re-fi so they could use some or all of their equity for these purposes. Taking advantage of this desperation, lenders steered many borrowers to ARM loans. Then, as the rising rates (including ours) bumped that monthly payment upwards, horrified homeowners began to find themselves unable to pay it. That was when the roof started to fall in.
Latest figures from the Mortgage Bankers Assn.: 14.4 percent of American homeowner/borrowers are now delinquent or in foreclosure on their mortgage.
It's hard to find 2010 figures on exactly how many people have mortgages, but U.S. statistics for 2005 show 48,394,000 home loans on the books. So today's figures might be closer to 50 million. At the massacre rate of 14.4 %, that is probably more than 7 million mortgages hitting the wall. But to get the real gritty human effect, we have to remember that each imploding mortgage affects more than one person. It hits a whole family, or a couple, or a single professional with a small business, not to mention a local community supported by the taxes that the homeowner pays -- all of which are being jolted by the deadly after-shocks from each default crash.
Surely we LGBT people form an identifiable percentage of this 7-million disaster-stricken base. If we posit the traditional 10 percent, that means that 700,000 of us could in dire straits on home debt. Even 5 percent means that 350,000 of us -- a small army -- are out of luck right now.
Meanwhile, LGBT activist organizations are wondering why political contributions are sharply down in the last couple of years. Well, no wonder.
How Loan Modifications Work...and Don't Work
When homeowners start scrambling to fix their personal mortgage crisis, they are always astonished when a lender refuses to accept partial payments. I certainly was. Even the bloodsucking credit-card companies have no problem working out a payment plan with you. Sometimes they take only 15 minutes on the phone to do this. But when it comes to real estate, the deck is stacked differently.
Next, the homeowner wistfully believes all the advertising propaganda on TV. The ads allege that our government and the lenders are now ready to help homeowners and rescue our country. To achieve that, they have created "programs" for loan modifications. Even the news anchors talk about the "programs." For a few weeks, I believed the propaganda myself. After all, I voted for Obama. And I grew up in the aftermath of the Great Depression, when people had voted another Democratic President into office in hopes that Roosevelt would create programs to help many Americans economically.
So the hopeful homeowner slogs through various rounds of application for a loan modification. What you hope for is a fixed rate, a reduced monthly payment -- perhaps even a reduction of principal. Eventually Tyler and I piled up enough paperwork to cram an entire file box.
But in the end, the homeowner is informed -- by a cursory letter sent snail mail -- that his or her LM application has been turned down. The fact is -- the lender has done the arithmetic and knows that they will make more money on your loan by seizing your house. So its underwriters look down at you from their lofty, unassailable, anonymous, non-accountable Olympian heights, and they say no.
In dealing with our lender, we never got assigned to a case manager till late in the game, when we complained that our case was being mismanaged -- one application had been turned down because of our alleged failure to provide requested documents. Yet we HAD supplied the documents before the deadline and knew that the lender's representative's acknowledgment of doc receipt was surely recorded.. So we screamed for a re-review, and got it. Even so, we never got to talk to the underwriters directly. Most of the time, we found ouselves talking to a flunky wearing a headset -- a different one every time we called -- who sat in a little cubicle and stared at our file on a computer screen, and was uninformed about our case.
Throughout the whole process, we got a close-up look at how obviously disorganized and slipshod these big corporations are. Different departments clearly weren't communicating with each other. Paperwork was lost. Vital information supplied by a homeowner could be ignored. Yet these are the big businesses to whom our government entrusts the nation's fiscal fortunes.
In the end, my business partner and I read the fine print, and figured out what the media and the lender weren't telling us -- that many American homeowners don't even qualify for the now-famous "programs."
Most of the programs apply to low-income homeowners who have Fannie Mae or Freddie Mac loans. Even with these loans, the lenders are picky about requirements, so it's hard to quality. Later came Obama's much-heralded HAMP program...but the ceiling for HAMP is loans totalling $729,000. So... if you have a home loan bigger than $729K -- and many Americans do -- the White House and the federal government is telling you to go fuck yourself.
Indeed, the lending industry and the major media have created an urban myth about homeowners with those larger-than-HAMP loans, hoping to ensure that nobody will sympathize with them. They allege that people with bigger loans were just greedy and looking for a handout -- that they signed onto a high-risk loan in order to get a house they couldn't afford. Little is said about homeowners like us who bought their homes years ago and afforded them for many years. My business partner and I never missed a single mortgage payment for 12 years. All of us saw the value of our homes triple over 10 or 15 years, and finally were compelled to re-fi in order to finance something needed in our lives. In our case, it was to raise new financing for our business. Others who re-fi'ed did so for equally valid reasons: perhaps to pay for a kid's college education, or handle unexpected medical bills.
So my business partner and I found ourselves being processed as a "regular in-house loan modification.". And lenders aren't granting many of those.
How many Americans are actually being helped by these programs? In other words, how many actually get through the tortuous process of a "trial modification," which can last for six months, before being green-lighted for a "permanent modification?" Not very many. By December 2009, only 31,382 borrowers had run the gauntlet to get permanent status, out of more than 700,000 who had applied. This shocking figure comes right from the Treasury Department.
In other words -- out of 7 million mortgages hitting the wall, only 31,382 people have really been helped so far. And sometimes they found themselves modified to a larger monthly payment, not a smaller one.
I'm not impressed.
To put it another way -- the President for whom I voted has hung me and my business partner out to dry -- along with 7 million other people. His administration has given billions of dollars to these big corporations, but has not compelled them to do the right thing by us. So the lenders know they are free to ride rough-shod over the top of us.
How a Short Sale Works
From that point on, we were launching a frantic search for a reliable L.A. realtor who specializes in short sales.
A short sale, we had learned, is preferable to foreclosure. Sure, you lose any shreds of equity you might still have in the property. You hand over the keys and walk away without a penny (though some lenders will give you "moving money" to make sure you don't vengefully trash the place on the way out). But the lender agrees to accept the lower-than-market sale price as full payment of the loan. So a short sale puts less of a black splat on your credit record than a foreclosure does.
To make a short sale water-tight, you must also get the lender to agree not to sue you later for the unpaid balance. If the property was your primary residence, you may qualify for an exemption on paying income tax on the balance. (Yes, Virginia, the government might regard the unpaid balance as 'income" to you.) We realized that we needed a competent lawyer's help to negotiate the short-sale process.
Eventually we settled on a local realtor firm whose staff included a sharp lawyer. The firm specialized in short sales in Los Angeles County, and had no consumer complaints against them on record. L.A. County is the hardest-hit area in California. In April alone, the month that our short sale went through, our county had 3,245 repossessed properties being sold at auction. Even Hollywood celebrities are losing their homes.
I wondered how many of those 3245 foreclosures were Angeleno LGBTs like us.
The realtor firm did a great job, making this painful process as painless as possible. We would pay them no fee -- all the fees would be paid by the lender. The first thing they did was get our lender to agree to stop the clock on foreclosure, meaning that the sheriff's sale was formally postponed.
The property values in our neighborhood had slumped somewhat -- our house had lost perhaps $400,000 in appraised value in the last couple of years. But the market there hadn't sunk as badly as it did in other parts of L.A. County. So even in "as is" condition, without cosmetic fix-ups and staging, our building got attention -- families with children were very interested in its 4 bedrooms and 4 baths. Indeed, the lender's executive in charge of L.A. County short sales saw the lingering value of our place. And a buyer came along whose offer was not too far under current market.
So our lender agreed to the sale, and threw in some moving money to boot.
Otherwise we would have become L.A. County's foreclosure # 3246 of the month. On April 30th, we packed the last of our stuff and turned over the keys.
The Long-Term View
How do I view this disturbing experience as not just an ex-homeowner, but as an author and historian?
I'm old enough to remember a time when most LGBT people didn't dare to be "out" about home ownership -- except in the rare urban enclave where acceptance had already been cautiously established. In fact, two men or two women didn't necessarily feel safe about openly living together as a couple in a house or condo. They pretended that they were just "roommates." For us, "life, liberty and the pursuit of happiness" includes not only the right to be ourselves, the right to marry, to be safe at school and work and serve our country in uniform, and the right to decent healthcare, but also the right to openly own or rent a home.
Without the financial and economic health of its members, the so-called "gay community" can't sustain itself politically. Having a home to call your own is at the core of LGBT rights -- the very foundation of our independence and pride. The "American dream" supposedly includes home ownership. If that's true, then the LGBT home is part of our personal American dream.
Do I think that Obama and his administration have let our community down on the civil-rights front so far? Definitely. But they've also let us down on the fiscal front as well.
So why the strange silence from most LGBT media and LGBT activist institutions on the financial bullets that some of us are taking? I've never understood it. One of the few serious articles on the subject I've found is in EDGE Philadelphia.
It is now being admitted, in the business press, that African Americans are having a harder time getting loan modifications than whites. Dare we wonder if anybody out there is being turned down for an LM because the lender knows they're gay, or transgendered?
While the United States is racked with controversy over terrorism, the Gulf oil spill, and the Tea Party's emergence, this silent massacre of millions of home ownerships -- and the lingering after-effects of how people are "punished" by long-time bad credit -- may affect the country far more deeply. The American Dream is definitely disappearing in a nationwide blizzard of loan-modification paperwork. And with it are blowing away many Democratic homeowner votes that might otherwise have supported Obama in 2010.
My previous posts on this subject:
The LGBT share of America's humonguous private debt.
"Is the Wall Street Crisis a Gay Issue?"