Jim Cooper's Orange County; Foreclosure!

Oh yes. Do you. Oh no oh no I want is my first sale would it affect you dressed every day in Orange County a professional auctioneer like Glenn Ragland hold an auction sale outdoors. Oh you didn't used furniture or cars that he's selling you are coming off homes that used to belong to warn county families their foreclosure sales. And they have skyrocketed this year. We'll look into it. Today. I am the I am where I am where I am. For each working day a man walked out of the steps here at the orange Civic Center and conduct an auction.

What are you selling our homes in Orange County which have gone through foreclosure. It's called the trustee sale. The home is go to the highest bidder who becomes the new owner in Orange County last year there were twenty three hundred forty three completed foreclosures sold in trustee sales. That's four times as many as the previous year and the number is still growing. I'm Jim Cooper and I look into the problem today. People who are interested can learn about foreclosure sales through legal notices in newspapers or by looking on the bulletin board voted every day in the Orange County courthouse. Many people try to bid on foreclosure homes without knowing that this too can be very risky. Part of understanding foreclosures is realizing how they now play a part in about eight out of 10 personal bankruptcies in Orange County this past year there were 10000 personal bankruptcies compared to 4000 the previous year. This is the federal building housing the county's bankruptcy courts or the bankruptcy court room where both business and personal bankruptcy cases are heard. The human

cost of foreclosures is seen in the high rate of personal bankruptcy that go along with him. And there's another unhappy figure almost a third of the bankruptcies also show that a family breakup or divorce is also involved. Yet again it's about a bankruptcy judge for 18 years. He handles 200 bankruptcy hearings approximately per week and his court one of two bankruptcy courts in Orange County. You must deal with a lot of human pain and anguish that goes along with that. We certainly do. I'd like to ask what pattern seems to occur in all of these hearings and how many of them is foreclosure a fact or Chapter 13 cases. Chapter 13. The wage earner case is probably. About 85 percent of those involving foreclosures on the family home.

You say 80 percent of your bankruptcies are caused by foreclosures. Can you give a typical profile of one of these bankruptcy for foreclosures the cause. Well the typical of Chapter 13 was a debtor who has bought a house not too many years ago three four years ago when inflation was at its highest. And the expectations of the continuation of inflation were at their highest. The debt would have bound himself. Very often on a first second and fourth mortgage. And to meet the payments simply requires. An exorbitant proportion of the family income. It isn't unusual at all to see a case where monthly payments on the mortgage years would require 50 or 60 percent. Of the family income. How do people get trapped into 50 or 60 percent of their income and that we don't know we don't know.

Anybody could have been so foolish as to buying themselves to make that much payments. Going to be heard by for the term creative financing does that play a big part in these foreclosures and bankruptcy. It certainly doubt. The word financing really is a deceptive term. I think. What it boils down to as the financing involved that an experienced winter such as a banker or manager of the Savings and Loan would never make a bad loan to begin with. And those loans lead to a tremendous portion of the time. This is the TV service company in orange which specializes in processing notices of default and in handling trustee sales and foreclosures of homes. Last year it handled thirty thousand foreclosures in California and Nevada as the biggest company of its kind. The County Recorder's Office reported that there were twenty seven

thousand two hundred thirty eight notices of default. Back here a 33 percent increase over last year. Default notices go out if the home payments are 60 days delinquent on the home. The owner then has 90 days to pay it off for foreclosure proceedings then start of all 27000 default notices only twenty three hundred forty three actually presented in completed foreclosure last year. Bill dyke is chairman of the board of TV services company which last year processed 30000 foreclosures in California Nevada at the largest company of its kind with all the foreclosures. One of the single. Most prevailing reason well with the problems. The problem that results in people losing their property is that the property is so heavily encumbered that they have no equity. And that generally arises through one of two ways either they have. Voluntarily or by borrowing against the property heavily too heavily encumbered or they may have gotten debts in other

ways and these debts eventually attach to the property. We have a creative financing where people have a first second or third sometimes a balloon payment is that a big factor in all the foreclosures. Well in my opinion it has been we don't have statistics but over the last several years there has been a good deal of creative financing especially in the latter part of the 70s and this has resulted in many of the situations that I just described where the property is so heavily encumbered if you don't have a constant appreciation of property values there's not enough equity in the property to save it from foreclosure. We hear about the. Pain of the person being foreclosed on. But there's another side of the coin in this foreclosure business where justice has to be served. Well you know obviously. It's always painful when someone loses their property. On the other side of the coin however it is very frequently painful to the lender. We handle a

significant number of foreclosures for individuals who have either taken back a trust in the sale of a property or have invested in a second trust deed. And in many cases these people require the income from this investment for their own living expenses and we see many sad situations there as well so we look at our service really as being one that protects the rights of lenders. If you're just on a soapbox and give one message to young people trying to get into the business of having a home what would you say to them. Well once you've gotten in. Don't try to live beyond your means. That is I would say the major problem as far as why we see foreclosures in economic times such as we have today of course there are situations where people don't have the control. But foreclosures started relatively high even during good economic periods and it's only

because people live in them. And now we're going to meet some of our guests today each with a separate perspective and vantage point to view this subject. John world is the western regional vice president and general manager of Trans Union credit information company. One of the nation's largest consumer credit reporting companies past president of the associated credit bureaus of California and is currently chairman of Consumer Credit Counselors of Los Angeles a nonprofit consumer debt counseling service that is President of the SEIU enterprises of Huntington Beach and is a licensed real estate broker and investment consultant. She did instructor and syndicate in tax shelters. He's the general partner of the multimillion dollar properties and trustee for funds of more than 100 investors. She's the author of a new book. All you need to know about foreclosure then we have another one to about homesteading with an ask about. Leonard saying chairman of the board and chief executive officer of mercury saving the 1.3 billion dollar Orange County based financial institution. He's chairman of the United States

league of savings institutions made up of 4000 savings and loan organizations. He called himself a home ownership activists from an actor but it might have done Margaret had been involved in the title insurance business in 1951 and 1984 and real estate security service located in Santa Ana. The company of which he is the president deals entirely in the foreclosure sales of both business. And real estate property. Well before we start chatting I'd like to have our viewers go through the tific because these are the facts ma'am like the present and they both make some interpretations and let's go over it again. The frog notices that means after 60 days when someone had left 60 days ago without paying a payment then it's possible for the lender to institute foreclosure and they have 90 days to clear it up. Default notices in 1981 were eighteen thousand six hundred six in 1982. They jumped to twenty seven thousand two hundred thirty eight. Now let's look at the actual foreclosures. These are where the foreclosure activity takes place in 1981. Six hundred eight homes in Orange County in 1982. Twenty three

hundred forty three home for a two hundred and eighty five per cent increase in the third area. Let's take a look at what has happened in bankruptcy because the bankruptcies are interwoven with foreclosures. In 1981 there were 4000 personal bankruptcies in Orange County in 1982. Ten thousand personal bankruptcy the one hundred and fifty percent increase. Let's start with let's start with you. Leonard I'd like to ask you if at the lender's perspective. How bad is the foreclosure problem. Well I think the problem of people being out of work starts the whole discussion. We have one out of nine people in this country rejoinders out of work. You have the living standard they have their home they have their food they have everything to pay for. But they're still out of work. So obviously with the kind of an economic depression we have to start with that base it's a serious problem. It's more serious in other parts of the country than it is here. But it is also a serious hit. And it's serious from the standpoint of the whole

community. It's not just the lender or the borrower but the impact of of the economic oppression which this really creates in our committee is very sort of. From the standpoint of very institutional lenders. And I hope we have some time to talk a little bit about creative financing because it's really an underlying problem. But from a standpoint of the institutional lever savings and loans of banks and others we're trying very hard to work with the people who are troubled we call it forbearance. If people have a legitimate i word well it's an old word it's been used in our industry for since the Depression and I'm not sure which of the British that is forbearance because it causes you to not enforce a contract which people will sign. So with that idea the lenders are trying to work with their customers the homeowners were all trying to will need to write The problem with its legitimately stated there been so many foreclosures Don. Then the state of California 54 companies have sprung up like yours whose sole operation is to profit foreclosures 54 new companies in the last two years in

California. I'd like to have you respond to this question. Being in the business of foreclosing Is there a lot of pain that you feel yourself since you have to deal with people lose in their homes. I would say that I personally don't feel too much pain unless I'm faced with the foreclosed person on an eyeball to eyeball level. Every every financial institution has to do its collection work and everything in its whole institution either has its own people who do this work. Or hire companies similar to ours to do it. Then I believe that the myth of the jets is on the other side of the coin is that sometimes a letter may be a small person who depends on the payment coming in so he have to exercise his rights to recover his proper Very true and I've seen some very very sad situations on the other side of the coin. You see from your vantage point is there any thing that seems to come to your mind that happens again and again and again in the foreclosure that you wish you could say if somebody would just not do

seconds that they wouldn't be in this terrible predicament. Well I agree with Mr. Dykeman that the majority of the foreclosure actions today are from the standpoint that people have overstepped their bounds. They're trying to live as well as or better than the Jones down the street. The second problem that I see and what could create a big remedy would be what those persons who are facing a problem making their payments would go directly to their lenders absolutely up front and ask for whatever assistance can be given them. When you deal with the lenders and I know that they're your clients in that do they want to be in the real if they didn't do they want these houses back they want to have to hassle with the thing. No no I don't believe that any of the majority of them. I mean I'm sure that when you're going to have the second lender who has made it particularly have been to just loan on a real property that has a large equity and he or they would like to get title to that property and make a profit. But by and large they do not want

the profits you had in another area and we're coming to you with Adi but you're in a different area you have to counsel people you counsel people on their credit and you've seen some of them for example the judge. Judge Phelps who says that people get 50 60 percent of their. Pay. Their disposable income is going to the house payment how in the world can they ever get into those kind of deals. I wish we knew. The number of people who do come in for debt counseling. Well they say that they just found themselves in at the the lender whoever it was was willing to make the loan they needed the money and so they didn't really think at the time that it was going to be 50 percent of their take home pay. And many times I should say it wasn't 50 percent of the time but the husband or the wife may have lost employment or had reduced hours. And it's it's turned out to the 50 percent of their pay. So they didn't start out that way. But consumer credit counselors strongly advise is the number one first contact to be directly for the people you owe money to. They're the ones that can and will with

your experience then when they when they take that route most often the creditors involve either mortgage lenders or credit card issuers or retail department stores. They want to work with it because they don't want to lose the money they'd rather work out a payment plan that you can live with than to lose the entire loan. To a bankruptcy or or just nonpayment Does it shock you. That. Eight out of. Ten. Of all the ten thousand bankruptcies in the past year 8 out of 10 of them have foreclosures as part of the action. No it doesn't shock me at all and one of the major reasons it doesn't shock me is that there has been such a poor record of perforation of bankruptcy attorney advertising. The minute the foreclosure notice that 60 days it's the paper get it the paper hits the public record. There are many attorneys that are now. Quick to get a mail things I do there's another industry that's drawing Our You bet it will call a. Friendly attorney who is going to get your bank rep as a rabbi and that's one of the three areas that I think and I don't mean to interrupt someone else but there are three areas of of so

called professionalism from without soliciting and I would say how slim a model for they are right now. One of them are those people who counsel people into creative financing because their interest was not the same as the interest of their client. Second some of the people were in a position where they were buying a home they couldn't afford because they thought it was an investment not a place to live in freedom or they had to live. Second are the people who are hustling on the bankruptcy situation. They're going to show you how to cut the corners and pay your bills. A terrible place and the third of the people that I call the equity thieves. People who are infected. And I really mean that. Who are in fact willing to homes on our property where they can put on a small second or a third behind a troubled first or second floor colos keep the first good close acquire the property and absorb whatever equity is with those remaining. That's not new by the way that's been going on in this country from here. If you talk about the forty thieves or some of the bodies and if I may Jeff there isn't any more thought of

what it was that or that the fourth group is a fairly new phenomenon a new entrepreneur in the marketplace and what is this and this. This person is waiting until you've had problems you've had a credit problem and now they're going to take some more of your money to tell you how they can clean up your credit and allow you to get more that you can handle. Yes there are a number that was bad like throwing a lead weight to the max out driving. Yes instead of throwing him a life preserver legally what about you. You work in both arena if you're a real estate broker. Yes you've written books that give both sides of the coin on foreclosures. What about the you know how to create financing basically is the bottom sheet to most of the problems that would prevent that by many people that were trying to upgrade their loans. Which was a bad situation that's one reason they have come to. The end but he felt the need to judge today that people are making loans. Judge Phelps said that the people making those creative financing deals are not lenders they're not people who are going around a bit and by definition of judging

who is and who is not qualified to have a live definition of the term creative financing you know. I got my brains beat on your shoulder a couple of years ago attacking creative financing wasn't stylish for a decade. But by definition creative financing involves a substantial loan from one person to another person in which no cash ever changes a seller takes back a loan from the person the selling his own do then he may buy another home and give another one the same way. You've got a great big domino thing out there. I think that in the billions nobody really knows much about when you have five foreclosures and in writing all that are in your back to that party. Just received a note and gave a note to party B who gave a note to party C and threw it out like you think it would break down the law that they have been going on forever. They fire everyone would move in but didn't have any more cash to put down in the new house just idled out in favor of him. Just go back to your newspaper ads two years ago and you will find the ads say we will help you put in creative financing and we will also help

you with in the tourney. Who will show you how to put it in place in violation of your contract. I think it's a little bit of a ray of sunshine at least I hope there is what is interest rates in the credit reporting business for the last few months we have been absolutely wrong with mortgage credit reporting requests 80 to 90 percent of them are refinancing of the created deals because interest rates are down. So now people are getting out from under those those rather burdensome loans and into something a little bit more stable a little bit more of an institutional loan that that they're going to be able to handle our company has thrown 50 million dollars into the pot. People dancing only they're under the gun to pay off their bullet having a qualified we're not going to let them but I mean if they qualified that qualified that one of the Bloomberg reforming of the whole thing out into something they can afford and just with 50 million dollars on the line and said Mercury 7 this will help you will help other people get into the game to you that you have some advice. One of the advice that you have in your book in the book that you have written evolve homesteading right about that

very quickly. The thing to know what they do. Sitting is good but that will not keep you from the deep. Then why is there good what is it there were issues that only protect you against an involuntary and I mean that you've made on the property of the voluntary them that you were on that we're not happy with that. If if you had not made your payments to Mercury savings or whoever you're still can be put into default and foreclosure you are a broker and all of your fears so you're saying that the average person would say that's a nice thing to have on your property to protect yourself against an involuntary thing. But I volunteer and then you put on the profits are not going to protect you against that you are a broker. Yes it seems that in some of the discussions we've had with the real estate brokers themselves perhaps they've been battered a little bit in saying that they helped put together the grant I notice in back and you want to defend that or do you think about defend it I think it has been done and I don't agree with the financing that was put on a lot of properties that are agree with having put people into a situation and I've seen it

happen. I haven't done it. I think what have I not only done what I have more than your amount going to your your home payment. Compared to your income and especially based on a situation that maybe you're working. 40 hours overtime a month. But I think the biggest problem if I can say this it probably doesn't pertain. I just want everyone forces I have talked and counseled a lot of people. I've kept them from going into the vault and foreclosure and I think our biggest problem with the people of today is that they have never been in a situation like this. It's an embarrassing situation. They do not want to have to deal with someone and admit that they had gone into the situation realize. They will. Only be honest with themselves and say that it's happening to everyone. It's I'm no one any different. But let me read you a past particularly eloquent authentic but we're all getting through with this is the path of someone who has gone through one quarter. This is a woman talking and you don't realize what it

means until it hit you think you're so stupid. Time she added. I couldn't even face people I couldn't talk for five almost six weeks not even to my sister. You've lost your house your security it's a horrid empty feeling like a slow death. I'll think old let me tell you a little bit about that and how will you deal with this every day. The mental institutions are concerned about. Our journalists. Most sensitive. Most humanistic people. To talk to those who want to come in and discuss their economic problems. Because unless a person gets up from within the cell and then with his credit. There really is no way to work it out. And working it out is there's a better answer than a bankruptcy or a default or you can work with them. Institutional lenders and legitimate concert was legitimate realtors do that service bill will all work with. Their filth. Just go to the legitimate sources and get advice that is of their

own best interest. Stay away from some of the hustlers of the triad was in the other deal. What do you say you're agency the that offers counsel and what is that something you'd advise someone who's watching the show and what would you say that well to do. First off don't get encumbered with non-mortgage debt. That exceeds 20 percent of the take home pay. Number one that's not a lot of money and so people say well once I've paid my car payment my Visa card I'm over that. Yeah well that means don't don't want to buy any more. Yes and stop charging. Get back on an even budget and stay on it. Take two years but you'll be an awful lot better off. Peace of mind. Any advice you'd have that you'd like to say that the first thing that I'd like to do is correct a small mistake you made when we first entered into this program and that was. And it might stick in some of the viewers minds and it might lead them into a sense of security. A foreclosure action can start the day after the payment is

due. There is no 60 degrees. Normally institutional lenders do not like the bad name being foreclosures. I see the federal government agencies will not allow a put to you that if you fail to make your pain let's say the first the market absolutely the second the march the lender and start that court a little bit. But in practicality because I doubt there are some that will jump on the foreclosure immediately which is therefore a legal right. The majority will wait a certain period of time. But remember the clock is always running that senior mortgage interest is growing and the taxes aren't being paid. The insurance is becoming a lien so they have to act at some point. We have to get the few minutes left. You use the word forbearance What about national policy for a band. Tragically the administration at this point. And this last week alone in a Senate hearing when I was present with the goal Monday in the house meeting I was here this week the most freshman was taking the position that no assistance for foreclosures

will be part of the national policy but there is legislation being introduced in both the House and the Senate to assist people. But it's not passed yet the president has said he's going to veto it. So I think at this point in time unless there's a major public upgrade there's going to be no help from the national picture. But voluntary forbearance. You talk with lenders all the time most of them I wrote all our savings and loans I speak for all the savings loans and I testify and I will tell you that all 4000 of us and all 10000 of the banks that do real estate live they all want to work with troubled people and forbearance is our stock in trade because we're human beings too. Last parting piece of advice and I think I would like to suggest that I have a list of things that you could do if you were facing a possible North or deep fault and I would be glad to mail others out if someone would like to send their name and address. Find anyone to write the station we will send those apre of charge your time is almost up and leave appreciate your advice all of you on a subject that concerns many people.

Again I think that we have won you know the program is very delightful word. Time is up now please join us next week at the same time and we will be discussing another problem that is. The problem confronting people who are victims of crime. And. At the same time next week and I'm Jim Cooper. Thanks for being with us.