Too many foreclosures in your city? San Diego thinks so, and they’re suing Bank of America/Countrywide for engaging in predatory lending practices which they allege has contributed to their growing number of foreclosures. This according to the Union-Tribune:
San Diego City Attorney Mike Aguirre is taking on the lending industry, filing suit Wednesday against Countrywide Financial, which he accuses of engaging in unlawful and fraudulent predatory lending that victimized numerous San Diego home buyers.
I won’t comment on Countrywide in particular, but certainly lenders are at least partly to blame for people walking away from their loans (and houses). There were a lots of loans dished out to people who couldn’t afford them. As long as the collateral kept appreciating it wasn’t a problem, but if not…
Making loans to people who couldn’t afford them proved to be a risky business
OK, so if lenders are partly to blame, someone else must also be partly to blame, right? How about the borrowers? Just as loaning money to people who can’t afford it is dangerous, so is borrowing money when you can’t afford it. The truth is that some lenders probably used predatory practices; some not nice people did not nice things to nice people. However, many loans were made by lender and borrower mutually agreeing on the terms and the borrower’s creditworthiness (wink wink).
For their part in these deals-gone-bad many borrowers stop paying. In turn, the lender takes their house. Seem reasonable? Not to San Diego:
In a press conference held in front of a vacant, partially burnt Skyline home that has recently been taken over by Countrywide, Aguirre said he hopes his suit will be a way to bring other lenders together to work out settlements with borrowers who are about to lose their homes or who already have been foreclosed on.
“We are asking that any additional foreclosures be stopped and that the parties come together and work out a reasonable alternative based on the values of these properties today so we can stop the spread of this foreclosure disease,” said Aguirre, flanked by Assemblywoman Lori Saldana, San Diego police officers and other members of his office. “We want San Diego to be a foreclosure sanctuary.”
While Aguirre said he also plans litigation against other lenders, including Washington Mutual, Wells Fargo and Wachovia Corp., he said his main goal is to resolve the issue of growing foreclosures “in an orderly way.”
San Diego wants to be a foreclosure sanctuary and who can blame them? Foreclosures are bad for the neighborhood (and the overall community, and city, and county…). They drive prices down and let’s just say they’re usually not the nicest house on the block. They’re also bad for the both the borrower and the lender. So Aguirre is actually on to something with this:
…the parties come together and work out a reasonable alternative based on the values of these properties today…
Talk about a “win-win” situation. If the lender and borrower can get together and modify their loan, maybe the borrower can keep their property. The last thing the lender wants is to take the property back anyway. It’s going to cost them a whole bunch to foreclose and then turn around and sell it.
Unfortunately, while loan modification seems like the way to go, I’m not hearing many success stories. What I am hearing from clients here in Bullhead City and across Arizona are lots of frustrated homeowners who can’t even get an interested human on the phone to talk about it.
I’m no fan of litigation. I don’t know of any win-win stories that end with “…thank goodness they sued us”. What I do know is that if lenders and borrowers could come together to work out their mutual problem, foreclosure numbers would go down and that would be definitely be a win-win situation.
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