The Twelve-Year Mistake Part 6: The Bureaucracy

By Shamus Posted Monday Jun 17, 2013

Filed under: Personal 194 comments

It’s late in 2010, and things are finally coming to a head with the bank. Now that I’ve been laid off, money has become tight again. We missed a mortgage payment, then another. And another. The money just isn’t there. There are no cutbacks we could make that would bring us anywhere near the mortgage payment.

This is strangely liberating. For the first time in ages we’re paying all the (other) bills on time. Our finances stabilize. We no longer have a dozen problems. We only have one problem, which is that our mortgage is in default.

Note that I don’t really have any good pictures in our library to tell this story, so I’ve decided to scatter around some images of a trip the family took to the Carnegie Science Center in July 2010. I’ve loved the science center since I was a kid. It’s like Six Flags for your brain.


My daughter Rachel is experiencing the cerebral delight of having oddly-shaped objects in a place where nobody is going to yell, “Don’t touch that!” If you can walk through this without waving your hands over the “handrails” then you are officially Too Old.
My daughter Rachel is experiencing the cerebral delight of having oddly-shaped objects in a place where nobody is going to yell, “Don’t touch that!” If you can walk through this without waving your hands over the “handrails” then you are officially Too Old.

I'm plugging along at my writing and freelance work, making what I can. Heather does paintings now and again, and sometimes works as an assistant for an antiques appraiser.

In the meantime, I'm trying to reconcile with the bank, somehow. The bank sends us a bunch of paperwork from their “loss mitigation” department. (Or is it loss litigation? Honestly, I can never remember. I like how either one works, though.) I fill it out and send it back. They're offering to re-negotiate the terms of the loan. Applying for this is a somewhat convoluted, multi-step process.

Generally, when you're dealing with a mortgage in default you’ve got three basic things you can do. In order, from least destructive to most destructive:

  1. Re-negotiate or re-finance the loan. You can mess around with the interest rate or payment terms of the loan to make it easier to handle. The bank might make less money in the long run, or they might make more money but wait a lot longer to get it. The deadbeats get only a modest black mark on their record. This isn’t a bad outcome.
  2. Short sale. If the deadbeat owes more than the house is worth, have them sell the house and all proceeds go to the bank. The bank can usually get a much better price for the place this way than if they unload it at auction. The bank takes a modest loss and the deadbeat walks away with nothing. Not a bad outcome, although the deadbeat needs to be willing to work with the bank. If they dig in and fight to stay in the house, then this option isn’t available.
  3. Foreclose. Boot out the deadbeats and sell the house. The deadbeats get a massive black mark on their record and basically can't borrow any money for a long time. The bank unloads the house at auction and gets a fraction of the value. Everyone loses.

Esther is playing an analog version of the classic <a href="">Snake Game</a>. In this version you control the snake by turning a wheel.
Esther is playing an analog version of the classic Snake Game. In this version you control the snake by turning a wheel.

I'm sure there are other options in different circumstances, but these are the major ones I know about. I'm trying to work with the bank and pursue option #1, but they don't seem to have their act together. I have a lot of conversations like this one:


SHAMUS is sitting at his desk with the phone pinned between his ear and his shoulder while he shuffles through a handful of scary-looking official documents.

On page three of the packet it says to provide paycheck stubs to document my income.

(Reciting from a long-memorized script in a hurried monotone.)
They use those numbers to determine your eligibility for participation.

Yeah, see. I don't have paycheck stubs. I earn ad revenue and payment for contract work. But that income is irregular, and the form doesn't give me a way to report irregular income.
So how do I fill this out? Do you want an average? Over what time period? Or should I fill out a different form?

For your income?

Yes sir.

Well, you'll need to show any paycheck stubs on the form to determine your eligibility for participation.

All of my conversations with them are like this. It's baffling. I don't want to over-report my income. (Or else we'll end up with a re-negotiated loan that I still can't pay.) I don't want to under-report it. (Which would be dishonest.) All of the forms ask for simple answers to complex questions and asking for clarifications leads to circular conversations.

Even more hilariously, there's some sort of expiration date on this paperwork. They send me some, I send it back. They send me more, I send it back. We talk on the phone and clarify things, but rather than fixing things on the phone right then, they need me to write the clarifications down and send them in. Then we cross the sixty day (I'm guessing) threshold and suddenly all the paperwork is rendered void. The next time they call me they act like I'm a band new case and ask if I would like apply for the loss mitigation program. Okay, fine. Then it all begins again.

Issac is messing with some sort of wind-tunnel / paper airplane exhibit.
Issac is messing with some sort of wind-tunnel / paper airplane exhibit.

This drags on for nine months. Eventually I start to feel like I'm taking advantage of their crippling bureaucratic ineptitude to get free housing. I really feel guilty doing this. I'm happy to do whatever I can to make this right. Whatever works best for them. But instead we're sending papers back and forth. I try sending a single payment. They send it back. (When a bank is foreclosing it's normal to refuse payments like this. I don't quite get the mechanics of it, but I understand this is normal.)

After almost a year of this I come to my senses and Google around for a mortgage calculator. I run the numbers myself and see that re-negotiation is impossible. There's a limit on how low you can get the payments by extending the terms of the loan. You can't ever get your payments lower than a single month of interest on the debt. Since we’ve been stacking on interest for a year now, this number has even gone up slightly. It's not that far from my regular mortgage payment at this point, which means this entire year-long game of phone tag of paper-filing has been in pursuit of a mortgage that's still too much for me to handle. They should have realized this ages ago. They had the information to figure this out from the first round of paperwork.


I suppose if I wanted to be a jerk I could keep playing this game and live here for free, but that would be wrong. I made a promise to pay back this loan and I'm failing to meet that promise. The least I can do is not be a jackass about it.

By now it’s 2011 and I’m putting a lot of time into a new book. I don’t have a title yet. The whole thing sprang from a funny idea I had while playing World of Warcraft. What if someone brought you back from the dead, but due to some sort of mix-up you weren’t the person they intended to revive? At the outset I was aiming for a comedic book, perhaps something like my Shamus Plays series. But right from the outset I lost my grip on the tone. It’s been drifting further and further from comedy and becoming a lighthearted action-adventure. That’s not bad or anything, but I didn’t know this was something that could happen to an author.

Dear Science Center: LINCOLN LOGS ARE NOT SCIENCE. They are the opposite of science. They are a low-tech toy that mimmics a very low-tech building technique. Having Lincoln Logs at the science center is like having a horse at an auto show. The only way this qualifies as science is in the archaeological or historical sense. </p>
<p>But I gotta hand it to Lincoln Logs as a product. The toy is a hundred years old, and in all that time they haven’t changed a bit: No glow-in-the-dark, no fancy colors, no gimmicky playsets, no crossovers, no cutting corners with plastic logs, no chasing trends. Wood logs, green roof slats, and that’s it. <a href="">Even the packaging</a> has been immutable for over half a century.
Dear Science Center: LINCOLN LOGS ARE NOT SCIENCE. They are the opposite of science. They are a low-tech toy that mimmics a very low-tech building technique. Having Lincoln Logs at the science center is like having a horse at an auto show. The only way this qualifies as science is in the archaeological or historical sense.

But I gotta hand it to Lincoln Logs as a product. The toy is a hundred years old, and in all that time they haven’t changed a bit: No glow-in-the-dark, no fancy colors, no gimmicky playsets, no crossovers, no cutting corners with plastic logs, no chasing trends. Wood logs, green roof slats, and that’s it. Even the packaging has been immutable for over half a century.

I try asking the bank what THEY would like to do about this mortgage business, but then I just get a canned response offering the different mitigation programs and asking me to pick one. They either don't care or aren’t allowed to express a preference.

I figure if I was in their shoes, I'd want the deadbeat to sell the property rather than go to foreclosure. So now I'm aiming for option #2. It's not exactly “everybody wins”, but more like, “Everybody stops losing”. It stems the tide of red ink and lets Heather and I find a place where we can live within our means.

It takes the bank a long time to wrap their head around this idea. I mean, it's one of the things they suggested, but they act like they don't know how it works. They tell me to put the house on the market, which is impossible because I don't know what they want to ask for it. If the place was any further underwater I'd have to pay my property taxes in seashells. There’s no possible way we could ask for the balance I owe, so the bank needs to take some kind of loss, here. I have no idea how much. They are a massive super-conglomerate with access to some of the most detailed home sales data on the planet. I'm a dummy who has already demonstrated he's inept at this and shouldn't be trusted with financial transactions more complex than buying a combo meal. I should not be setting the price. In fact, I have no right to do so. I mean, by setting the price I’d implicitly be deciding how much money they would lose.

They seem to figure this out after a few more months of phone-tag and paperwork. We finally get the house on the market and they set a price. Their price strikes me as being… extremely optimistic, but whatever. They're a mortgage institution. They have to know what they're doing when it comes to property values.

Thus begins several more months of foolishness. Once or twice a week, the realtor calls and tells us someone wants to see the place. We run off and let them show the house. (It's summer, so we often go for ice cream.) Aside from needing to keep the place a bit cleaner than we prefer and needing to bug out at random times, this part is painless but also a little depressing. Lots and lots of people look at the place, and nobody makes an offer. Not even a bad, insulting, worthless offer.

This is another flight exhibit that combines airfoil with blowing air to explain how airplanes work. The sign behind Rachel says Roll, Pitch, Yaw.
This is another flight exhibit that combines airfoil with blowing air to explain how airplanes work. The sign behind Rachel says Roll, Pitch, Yaw.

The bank continues to call once or twice a week while this is going on. I wouldn’t mind, but every single phone conversation with them must begin with a long preamble where I have to recite basically everything.


Hi, this is Shamus Young.

Hello I’m [Guy] calling on behlf of [bank]. May I speak with Shawmoze Young?

This is he.

You understand this call can be recorded?


And you understand this is an attempt to collect a debt?


And you understand that anything said here can be used for that purpose?


Can I have your social security number?

Blah blah numbers blah number blah.

And I also have [information] on a Heather Young. Is this correct?


And can you state the address of the property.

[I state the ENTIRE address, including zip code.] (Why are they asking me this? Under what circumstances would either of us not know this, and what would happen if we didn't?)

And the number I have on file for you is [reads me the same dang number he just called] is that correct?


And are there any other contact numbers where we can reach you?

(This is a trick question. If I mention my wife's cell phone, they ask me to recite it. If I say no then THEY recite it and ask me if it's still valid. If I say “no” they will always ask me about this number anyway, every time, forever and ever.)

And can you confirm that you are currently living in the property with the intent to sell?


Okay Mr. Young… [finally gets on with the call itself.]

I wouldn't mind, but after a year of this it really begins to grate. It's such a stupid waste of time, and after pissing away a couple of minutes with the boilerplate stuff the call usually ends with:

Okay Mr. Young, did you receive the paperwork and workout package sent out on [last month]?

Yes. We filled it out and sent it back.

[Typing on computer.] Okay Mr. Young, I see we did receive that paperwork on [last week]. Do you have any questions for me today?


Man. I know I'm the one in the wrong here, but these guys are not doing themselves any favors.

There’s a story of a friend-of-a-friend who lost her house to the bank. They foreclosed, and she fought eviction. When they finally got her to move out she went around the house and bashed holes in the drywall. I understand that losing your house is a sad or traumatic thing, but deliberately destroying the property just to spite them? Makes me mad. Why would you lash out at the bank? You’re the one who failed to pay! They’re just trying to stop losing money. From reading around the interwebs, I gather this kind of thing is actually common these days.

Now that I’m in a similar position I can kind of get where some of the anger is coming from. It’s frustrating trying to deal with a smothering bureaucracy that doesn’t have clear goals, doesn’t communicate well, and is careless with both your time and theirs. I’d never deliberately inflict additional financial damage on them, but I do find myself feeling a lot less contrite.


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194 thoughts on “The Twelve-Year Mistake Part 6: The Bureaucracy

  1. MichaelG says:

    I’m hoping this story doesn’t end with a short sale or foreclosure resulting in a huge tax bill? Because I’ve read that the IRS regards the difference between what the bank got and what you owed as income. Income you are required to pay taxes on, despite the fact you never saw it.

    Also, I wonder if the reason the bank couldn’t figure out your income situation is that you didn’t say the magic words “self employed” or “small business owner”, which would have kicked you into the right category?

    And perhaps they are legally required to ask these stupid questions on each call. I’ve read that there are scams where you declare yourself owner of some property and sell it out from under the real owners. Apparently, it’s pretty easy to file the right paperwork and really ruin someones life.

    Of course some articles on this subject make it sound like the banks deliberately make the foreclosure process cumbersome because they don’t want any more foreclosed houses. Even if you aren’t paying, as long as the house isn’t officially in foreclosure, they don’t have to list it as a loss on their books. Just a “late payment.”

    Or maybe it really is incompetence. I read that back during the Savings and Loan crisis in the 1980s, many of these bank managers had no idea what they were investing in. The bank had run on autopilot for years — what they joked was the 3-5-3 rule: “pay 3% interest, charge 5% interest, and hit the golf course by 3pm.” I wouldn’t think banks are still that clueless (they are a lot larger), but who knows?

    1. Scampi says:

      I wouldn't think banks are still that clueless (they are a lot larger), but who knows?

      Being larger isn’t a qualifying attribute to being competent, as most people on this blog should know (we all know about EA, right?). Even if a company gets amazingly large it may only mean they became larger to “cover” their own incompetence, kind of hiding their lack of efficacy.
      My current employer actually grew a lot in the past years, but it’s pretty obvious that the management made some rather dumb decisions in the last years, firing employees while at the same time not replacing or buying necessary machinery which will, in the long run, probably come back to bite them. They made their calculations on the basis of “minimum expenditures”, as it appears, and if something goes wrong in the next few years, they will seriously lack the ability of staying operative, since the lack of employees causes them(us) to get sick more often from the increased strain, while the lack of machinery reduces the working capacities of each employee.
      So the company’s total revenue numbers grew, but this doesn’t necessarily signify any increase in efficacy.

      1. ENC says:

        “Being larger isn't a qualifying attribute to being competent, as most people on this blog should know (we all know about EA, right?).”

        Actually they’re quite liquid, they managed to survive several years of cash flow losses as well as minor net losses, the GFC, managed to make their company much more efficient with downsizing, managed to significantly increase their digital revenue, and outline the main risk factors for themselves in a company in their latest 10-k form on their website and how volatile the industry as a whole is.

        They also made .32 EPS when the par value is .01 which shows how volatile the company is in its current stage.

        They dipped below the NASDAQ due to the GFC, not due to whatever the hell you think.

        I like to think that they downsized themselves very effectively, going from 60 games per year (during their huge loss period) to around a dozen. Not many companies could drop as many people as they did (and pay out as many severance packages) yet still retain the same earnings. But OHH THEY’RE BAD AT BUSINESS LET’S PRAISE VALVE’S AMIABLE BUSINESS BEHAVIOUR!

    2. Peter H. Coffin says:

      I am a little confused as to how this could end up with a huge tax bill; unless somehow the house sold for rather more than it was purchased for it’s going to be recorded as a loss, not income.

      1. lazybratsche says:

        The general idea is that debt forgiveness or cancellation can count as income. I think that definitely applies to, say, credit card debt, where $X in debt forgiveness is essentially equivalent to an $X gift that you use to pay down the debt, and is therefore taxable like any other income. Of course, mortgages are a complicated thing that I don’t know much about, so I don’t know if something similar applies here. It’s probably slightly different in every state, which is part of the reason that national mega-banks have such a ridiculous bureaucracy.

      2. MReed says:

        If you take out a loan for (say) $200k, perform a short sales for $150k *and the bank forgives the extra $50k* (v. requiring you to continue to make payments on it), then from the IRS’s standpoint you’ve just recorded a gain of $50k. For it to work otherwise, you’d have to record the $200k that you received initially (to buy the house) as a capital gain, followed by taking losses each year as you paid off the loan.

        1. Mephane says:

          So the reason is, because you don’t pay taxes (or do you?) on the initial loan?

          1. MReed says:

            Correct — when you buy a house, the money provided by the bank to complete the purchase isn’t taxed.

            Payments made prior to the short sale are deducted from the amount of the gain — if the loan was for $200k, the sale was for $150k, and you’ve made $50k in payments, then that dramatically improves the tax situation. You definitely want to consult with a tax professional here, as I suspect matters get very complex in this scenario.

            The biggest issue that I see here is that your mortgage payments are divided between principal and interest (“P&I”) — *and you get to write off the “interest” portion of the payment against your income taxes*. For clarity — the sum of all principal payments exactly equals the amount of cash provided at closing and therefore the principal payments are the only ones that “reduce the amount of the loan”. If you convert these interest payments into principal payments (to further reduce the gain on the short sale) then you almost certainly are no longer entitled to deduct these amounts from your taxes in prior years. Deciding the optimal strategy at this point becomes a very complex optimization problem, further complicated by the minutia of tax law & bankruptcy law.

            In all likelihood, this explains the “recommended price” that the bank gave Shamus when pushed — it is the remaining amount of principal on the loan. Assuming that he has a 30 year note, and has only been making payments for a few years, that amount is likely 95% of the original amount (sale price – down payment).

        2. Deoxy says:

          The part that is so ridiculous about this is that I took a loss of $50K in the value of my investment – my home. I managed to pass that loss along to the bank, but that just puts me back at zero.

          Investment income from house: -$50k
          loan forgiveness income: $50k
          Net: $0 actual income

          Now, credit cards or other unsecured debt, sure. And I can see how, if I took out a home equity loan against the equity I had, maybe that could work like unsecured debt (though it shouldn’t, since the whole point of a home equity loan is that I have home equity to cover it – though I suppose that could be to “cover” it, not “secure” it).

          But the basic mortgage? It makes no sense.

          1. Namfoodle says:

            The problem is that you borrowed the money that you lost on the house investment, but you didn’t give up any cash. So it’s not really a loss of income. It’s a “spiritual” loss for sure, but you didn’t write a check for $200K (out of previously taxed and saved up income) and then sell for $150K. You borrowed $200K and then didn’t pay it all back after getting use of the $200K for some period of time (the house). I’m not sure how it works in a Short Sale, but I assume that the sale price has an impact on the bank’s loss and your tax gain.

            When a bank forecloses, they actually tell the IRS how much they think the house is worth when the get it. They have the option of just putting down your loan balance (probably regardless of what they actually think or the eventual sale price). If they do this, you are net zero with the IRS.

            1. Deoxy says:

              This is rubbish, and we do no other part of our tax code or society this way.

              If I purchase stock in a company for $200K, and I sell that stock later at $150K, I have lost $50K, whether I borrowed the money that I used or not. If I were to be forgiven by the person I borrowed the money from, when I file my taxes, I have a net 0 from that transaction – a can claim a $50K investment loss and they will make sure I mention the $50K loan forgiveness gain.

              How is this any different? I invested in a property for $200K, and sold the property for $150K, and I was forgiven the other $50K. WHAT I invested in makes no difference.

              At least, logically. Yes, I’m trying to apply logic to law – there’s my problem, right there, eh?

              1. MReed says:

                That’s a good point, and the IRS has you covered.


                In short, you can’t claim a capital loss on real property for personal use (such as a home). I suspect that the logic behind this exclusion is “Such property naturally gets ‘used up’ — therefor a loss is *expected* and therefore disallowed”. On the other hand, you /do/ have to report a capital *gain* when selling real property, so this seems rather unfair. :)

                1. Deoxy says:

                  Yes, there it is, exactly – the only way this logic works is if, when I sell the house and make $50K, I give that $50K to the bank, and I get to count that as a LOSS. Um, yeah, that’s not going to happen, eh?

                  One-way accounting like that is just plain deck-stacking, cheating of the most dishonest kind.

  2. Radagast says:

    They were probably hoping either a) the housing market would recover or b) you’d find a new job, either of which would mitigate their losses.

    I remember seeing stories on TV about people who actually tried to get their banks to forclose but the banks didn’t want to.

    The funniest was still the person who forclosed on her bank though… showed up at the branch with the sheriff and booted them out!

    1. rayen022 says:

      i remember that. I also remember laughing myself to tears watching the new coverage of it.

    2. Steve C says:

      Oh I wish that happened if for comic value more than anything else. Sadly it did not quite go that way. The sheriff showed up and they started the boot out process. The bank was only locked out for an hour while they got a check.

      I would have really liked to see them cart off the bank’s furniture (with the moving van they did have) then put it up for public auction. I would have (rightfully) claimed that I couldn’t trust their check and wouldn’t have accepted it.

      1. Deoxy says:

        Actually, yes, they gave him a check, but they had FAR more cash (locked inside the building) than they owed him, so yes, the check was obviously good.

        But yeah, the housing situation in the US is completely messed up… and while the lion’s share of the blame lands squarely at the feet of the federal government (I give you Fannie and Freddie, among other things), the banks have not exactly covered themselves with glory, either – the big robo-signing fiasco, in particular, was entirely the banks’ fault, not the government’s, and the banks that were involved really got off quite lightly, considering all the laws that were broken.

        One funny aspect (though wouldn’t really be funny if the banks hadn’t entirely done it to themselves) of the robo-signing mess is that some homes can no longer legally be foreclosed – the current resident may live there as long as they like, making no payments, and the bank can’t do anything about it. Of course, the resident can’t sell it – as soon as they move out, the bank can do stuff about it… which means that, at least for many people, living there for the rest of their natural lives is easily the most financially wise thing they could do, barring some kind of crazy development.

        And there are a tremendous number of homes in the foreclosure pipeline, as Shamus’s home was during this time. If those were all listed, the prices of home would drop quite a bit (again), so one aspect of the banks’s predicament is trying to determine which course results in the lowest total loss… and there’s no good answer, as a lot of it depends on public perception, which is infamously difficult to predict.

        1. Kellandros says:

          Contrary to what you think, Freddie and Fannie Mae only got into trouble several months after the mortgage crisis became widespread.

          There were several root causes of why the mortgage industry failed, check Wikipedia for a good summary.

          And part of the reason for the big push for foreclosures over any sort of modification as it can help hide any problems with the paperwork trail, and basically start it over. That lets them go back to claiming the house and the loan as an asset again.

          1. Klay F. says:

            Whether or not Fannie or Freddie were in trouble themselves is almost completely beside the point. The mere existence of these two institutions was one of the root causes of the crisis. The housing market crash is what happens when all of Wall Street looks to the government to decide what is a good business decision. The secret the govt was keeping was that it had no better idea of what it was doing than anyone else.

          2. Deoxy says:

            Actually, contrary to what you apparently think, Fannie and Freddie were obviously in trouble LONG BEFORE the crisis, and that was obvious to anybody who actually looked at things. In fact, not only was it knowable and predicted, it was actually known and predicted by a significant minority of the players involved.

            I give the small bank mentioned earlier in this very thread that was smart enough to get out of the home mortgage business before the meltdown.

            And, of course, I also give you the public speeches by some Republicans (including on the US Senate floor, no less) predicting problems and requesting action. (Note that it was only some Republicans, and they, as a party, didn’t do anything about it, so I’m not saying they are blameless. The did less badly than the Democrats, but that’s not really saying much.)

            But of course, the real point (which you apparently missed) was not that they Fannie and Freddie were “in trouble”, but that they EXISTED AT ALL, and their activities MASSIVELY influenced the market.

            Without Fannie and Freddie, banks would have had their own assets on the line for almost all of these mortgages, and they most certainly wouldn’t have done nearly as many of these mortgages.

            1. Jay says:

              Fannie and Freddie weren’t the major cause of the problem. The major cause was securitization, in which the originating lender sold off its interest in the loan to investment banks who bundled them into increasingly complex derivative packages (CDOs, CDO-squareds, etc), got the ratings agencies to give good ratings, and sold them to naive investors (mainly Germans and pension funds).

              The original lenders didn’t care how good the loan was; they sold it immediately and didn’t bear the risk.

              The investment bankers didn’t care how good the loans were; they bundled and sold them to someone else.

              The rating agencies should have cared how good the loans were, but didn’t have the expertise to judge and anyway weren’t about to piss off the banks that were their customers.

              The ultimate investors cared how good the loans were, but the process was so opaque that they couldn’t tell. They just trusted the ratings agencies.

              1. Deoxy says:

                Yes, I’m well aware of all of that. You keep acting like you’re educating us on stuff we already know, as if facts that have already taken into account will change the obvious conclusions.

                The reason all of this could work was government intervention, in a bad way. Fannie and Freddie were the single biggest and most obvious part of that intervention, which is why they get mentioned a lot.

                Yes, you’re right, there are parts of it that can’t be laid at the feet of F&F. In fact, there are even some parts that can’t get laid at the government’s feet at all.

                Those parts are fairly small, and even many of those parts wouldn’t have been attempted (certainly on that ridiculous scale) without the already-highly-distorted environment the government actions created.

                Fannie and Freddie existed as a mechanism for the government to bear the risk of private investment. They created an environment where there was NO level of risk for the private actors, no matter how obviously bad the loans in question. If you can’t see how that would massively distort the market, even in the areas where risk theoretically would apply, then I can’t help you.

                1. Jay says:

                  If the private actors had been left with no risk, then the private actors wouldn’t have imploded to the point where they needed an $890,000,000,000 bailout.

                  I’m not saying Fannie and Freddie weren’t part of the problem, but IBG/YBG was a bigger part.

                  1. Deoxy says:

                    When a significant portion of the loan market is operating with ZERO risk, the pricing on the other portions is severely distorted.

                    Yes, they had losses, but Fannie and Freddie had losses in that same ballpark, meaning that F&F had roughly half the bad loans (plus quite a few others).

                    If you can’t understand how severe a distortion to the market that creates, then we can not have a meaningful conversation.

        2. Steve C says:

          The reason why I wouldn’t have accepted a check is because it’s being issued by that particular bank. You can always take a check to the issuing bank and cash it without an account. In this case, that can’t happen because the bank is both the drawee and the drawer.

          So the only option is to cash it at your bank. But then the deadbeat bank that started this mess can choose if they want to honor it or not. And they can bounce it weeks later if the so choose since they are also the ones clearing it. That wouldn’t be acceptable to me as the bank has shown they can’t be trusted. The amount of money in the vault has nothing to do with it.

          I would have insisted on either 1) Cash in full, 2)Check drawn on an account at another 3rd party financial institution, 3) Their furniture. (I would hope for #3 for comedy gold.)

  3. Disc says:

    I think the only thing worse than that is phone salespeople. I’m pretty convinced 99% of them are either robots or people who sold their soul to the machine.

    1. Mephane says:

      I find this comment discriminating and insulting against robots. They are far better than telephone marketing people.

    2. krellen says:

      Mostly they are people in a bad situation who need a job pretty desperately. Those sort of jobs tend to have extremely high turnover because almost no one wants it to be “what they do”.

      I may or may not be speaking from personal experience here.

      1. Disc says:

        It’s still hardly an excuse for the all too common shitty treatment of the customer. Blame it on the training or lack thereof, as a customer I want little to do with them.

        1. Raygereio says:

          It's still hardly an excuse for the all too common shitty treatment of the customer.

          They’re also all too common (probably far more commonly) at the recieving end of shitty treatment from customers. Which can easily result in them hating their jobs and just not giving a shit.

          When you get crappy treatment as a customer, it is certainly annoying and there’s generally no excuse for it. But neither is there for the crap your average store clerk, server, phone salesperson, whatever, has to deal with from customers.

          They’re just people trying to make some money.

          1. > They're just people trying to make some money.

            This is also true of prison guards, TSA thugs, casino owners, and tobacco companies. “I need the money” is not a strong ethical position.

            1. kdansky says:

              You forgot criminals. Oh wait, you didn’t!

              1. I was trying to stick to things that are legal but still unethical, because once you break the law it’s a whole different discussion. I also thought of prostitutes, which should be legal but aren’t in most places, but I left them off just to avoid the ambiguity. Personally, though, I would rate both prostitutes and drug dealers well above telemarketers for ethicality. Firstly they actually provide a service; and secondly they don’t generally speaking bother people in their homes, since their customers actually want what they’re selling and therefore actively seek them out.

            2. Cody says:

              Look I never worked outbound calls(Just inbound customer service for AT&T) but basically how people treat you is the same, and the way the treat you is like you just busted into their house and beat them with a hose.

              Also when your looking at not eating and getting evicted or going to your crappy call center job take a quick guess what one wins. No it’s not awesome but for a lot of people in that position it’s basically the best they can do at that point in time.

          2. Syal says:

            They're also all too common (probably far more commonly) at the recieving end of shitty treatment from customers.

            Telemarketers don’t get shitty treatment from customers. They don’t have customers. Customers are people who come to you for something, not people you have to seek out. That’s what separates phone salesmen from store clerks, servers, etc.

        2. Lovecrafter says:

          As someone who’s worked in the branch in the past (and has no desire whatsoever to do so again), I’ll say that Krellen hit the nail on the head. While I’ve seen my share of unfriendly call agents, those are outliers. The majority are normal, friendly folk who are trying to make the best of a shitty job (and often on a need-to-know basis), just like anywhere else.
          And let’s not forget the other side of the same coin: customers who treat the agents like dirt, although much like the bad agents, those are also outliers.

          1. Mintskittle says:

            As someone who’s been called sometimes multiple times a day from debt collectors looking for people I’ve never heard of, I can admit to getting angry and venting on the agent more than once.

            1. kmc says:

              I’m not a particularly wonderful person, but I can say that I went through a period where I got daily and more-than-daily calls to collect debts against, apparently, the last person to have my phone number, and I never once vented against an agent. This is because I had recently come out of a period of having my own debt problems and I was so damn relieved that they weren’t looking for me, I was practically singing when they asked for her.

            2. Deoxy says:

              I’ve gotten multiple calls over the years for medical bill collection for someone who shares my name but is about 20ish years older.

              I’ve really only lost my temper at one of them – I explained the situation to them, asked for the birth date of the patient, gave the decades of the two birthdates involved (mine and the other person’s)… and they claimed not to have the birth date, but, since this was my phone number, it must be me. It went down hill from there.

              Finally, I got quite angry, told them I would do their job for them (which actually got them quite angry, too, which I thought rather odd), and tried to run down service info myself by contacting the original service provider.

              At this point (when the first called me, no less), it had been about 6 years since the service, the provider had changed systems, and the archive was now offsite (because they had changed so long ago), so when the collector called me back, I pretty much told them to shove it – I had paid the dept in my time, even though it wasn’t mine.

              Yeah, that was fun.

        3. Felblood says:

          You guys do not get it.

          If a phone rep has been trained to do things a certain way, and he doesn’t do them exactly that way, he can be liable for anything that goes wrong on that call.

          You have to do everything exactly the way you were trained to do it, because you are not a lawyer and phone services laws are so insanely complicated that it’s shockingly easy to end up with fraud charges for a minor gaffe, if you don’t have that perfect shield of “this is how they trained me to do it” to protect yourself.

          I did a gig of INBOUND calls for CUSTOMER SERVICE, and the kind of legal insanity I had to grapple with was insane. Put that together with the public indifference toward the plight of bill collectors and telemarketers and you can bet their job is a living hell of parroting the same BS canned lines all day long.

          Shamus hated having that conversation twice a month. Image doing it 100 times a day.

          1. When I worked at an inbound call center, it was for a ‘high grade’ furniture chain where most of the furniture was made in China. The customer base we dealt with was…high income shall we say, so procedure was very lax to make sure we could offer a lot of wiggle room if they didn’t like what was up. In fact, there was no standard operating procedure provided to us of any kind. If the customers were shown to be rich enough, we’d offer up to 20% discounts even if nothing was wrong with their orders. And yet…

            A co-worker once got a call asking if any of our products were made via child labor and he assured the customer that we did not…and he almost got fired for it. They told him his response put the company at risk because his statement made them liable…as if actually being true wouldn’t put them in hot water already. So yes, as open-ended as our procedures were, we were not allowed to say our products weren’t made through child labor.

            ALL the facepalm…

      2. Mari says:

        Well I will admit that I have been a telephone salesperson. For 48 hours. After which I decided that I would rather eat dumpster food and give birth in a box in an alley than do that job anymore. Of course, I have intense phone aversion anyway so it probably wasn’t the smartest job to take, but desperation drives us to do nutty, nutty things. Mostly I hated bothering people and I hated sitting there politely while they verbally abused me over the telephone. I get that nobody wants to be bothered by telemarketers but you can politely say, “No thank you. I’m not interested.” and hang up. You don’t have to question my parentage and demonstrate your prowess with salty four-letter vocabulary when someone on the phone asks if they can tell you about the exciting world of pre-fabricated vinyl siding or whatever.

        1. Disc says:

          I’ve never vented at a telemarketer. At best I’ve hanged up in frustration because I couldn’t get a damn word in.

          “but you can politely say, “No thank you. I'm not interested.””

          It’s the telemarketers that won’t stop even when you tell exactly that which drive me up the wall. Maybe they’ve got better standards overseas, but here the average would seem to really vary between different companies.

          1. Mari says:

            Oh, I get you. That’s why I added the “and hang up.” It’s what I do on the odd occasion that somebody violated the Do Not Call registry and reaches us (although those are usually bottom-feeding scum and scams anyway which are the worst of a crummy profession). I’m not going to sit there and argue with someone over the phone about whether or not I need whatever they’re selling. I look at it as the kindest possible thing I could do. Politely inform them that I’m not interested and then stop wasting BOTH of our time by terminating the conversation.

            1. Chamomile says:

              The kindest possible thing is to do what Shamus (I think it was Shamus?) mentioned in that one blog post he did a while ago, say you’ll be right back, leave the phone off the hook, and then go back to whatever it was you’re doing. That reduces the number of other people the call center can bother.

            2. Alan says:

              Many salesmen (including most telemarketers, door-to-door salesmen, car salesmen, and anyone selling goods or services to businesses) intentionally abuse social norms to continue to apply pressure because sometimes it works. As someone raised to be polite, it is incredibly hard to shut them down. It’s important to accept that they are the ones being rude, they fully intend to be rude, and that as a result it is no longer rude to hang up, shut the door, or walk away. I try to do that, and I think I’m pretty good at it, but emotionally it still stings. This is why I hate salesmen so very, very much, because they are actively making our world a worse place by making people feel bad. These deserve every bit of hatred aimed at them.

              1. Neko says:

                Yes! The sort of scripts and training that these people get (my pet peeve are the people hanging around outside the train station, getting people to sign up for things) are deliberately constructed to hack around the normal social rules of conversation.

                “Hi, How’s it going buddy?” they ask, with a fake smile and dead eyes. “Not interested, sorry”, I say. Then they get all fake offended that they were only asking how I was and they haven’t even mentioned the terrible plight of the albino squirrel yet. How rude of me.

                1. LunaticFringe says:

                  A lot of modern sales just runs on basic psychological tricks that catch a possible customer off guard. The only good boss I ever had in sales always thought the Boiler Room had some interesting examples of how to ‘push’ people into buying things.

          2. krellen says:

            Most of the places these people work tell them that they must be told “no” three times before they are allowed to move on to another call.

            1. Deoxy says:

              I had a friend who worked for years as a telemarketer, and the company he worked for (they had no products – they were for hire, so they did whatever product they were hired to do for whatever time period – it varied a lot!) had a policy that they did not hang up, EVER – the customer had to hang up.

              He said that, after a very short period of time, no amount of insults bothered him… politely wait for them to finish the rant, then ask if they are interesting the product again… wait for next rant to end, ask again. Lather, rinse, repeat. He was a very, very calm person.

              1. Amstrad says:

                Not being allowed to end the call unless the customer hung up was the policy when I was doing a stint of debt collections a few years ago. I really does require being extremely patient. It probably also helped that at the time I had a somewhat perverted trollish attitude. Getting the customer to yell and shout while remaining perfectly calm myself was a small pleasure for me.

                1. Mephane says:

                  And thus we have final evidence that telemarketers are actually telephone trolls. The internet said so!

              2. Syal says:

                I imagine every rant was followed with “Is that a yes?”

                But that sounds like a pretty brutal policy, especially if you get someone like me who doesn’t hang up first either (and who enjoys insulting people and very rarely gets a good opportunity).

                1. Deoxy says:

                  From his perspective, a call with you would be “win/win” – you get to rant, he gets paid.

            2. kdansky says:

              After I was somewhat impolite to a telemarketer who was bothering me during dinner, the fucked actually called me up a second time to insult me after I hung up on him the first time. That was shocking. Now I don’t have a land line any more, and my life has improved.

            3. LunaticFringe says:

              Yeah it’s dependent on country though. In Canada, our no call is somewhat more heavily enforced then the U.S., the problem is that its provincial. So now its the next province over giving you annoying calls because their telemarketing laws are slightly different from yours. Quebec’s are pretty strict though, but hey, the language cuts out telemarketing from half the country anyway.

      3. LunaticFringe says:

        As a former phone salesperson I can safely say: Hey, wonder why we say everything in monotone? That’s cause we’ve read the same thing everyday for the past two months. Frankly, we’re bored out of our tits, and just want to do to the minimal amount possible to get a paycheck in this soul-crushing environment.

        1. Deoxy says:

          “bored out of our tits”? Never heard that one before – I’ll have to spring on someone this week and watch them sputter into their coffee. [Evil laughter]

          Edit: and apparently “tits” triggers moderation! Even better! Heh.

          1. Syal says:

            Of course with how wonky the system is it could just as easily have been triggered by “laughter”.

    3. Humanoid says:

      I never pick up my landline phone anyway, but over here in Australia we have a national database called the “Do Not Call Register“. Private citizens may register their phone numbers, which telemarketers are compelled to cross-check before calling. If the number is in the database, the telemarketer is subject to non-trivial fines should the recipient of the call report them.

      Unfortunately the charities, religious organisations and of course the political parties themselves weaseled themselves exemptions from the register. But still, it’s night-and-day compared to the days before the law came in.

      1. Alan says:

        The US has a National Do Not Call Registry, and it worked pretty well for a few years. Unfortunately over the last year or so it’s become useless. There are too many telemarketers will to violate the list, along with other legal requirements (notably to provide identifying information including the business’s address on demand). I believe the problem is that international calls have become cheap enough that it’s now cost effective to telemarket that way. The existence of laws in the US is irrelevant if you call from another country. Many of the calls are pretty obviously scams. Others I suspect are lead generation for another company. If I try to get identifying information, I get hung up on or blatantly lied to. I could spend the time to claim I was interested and wait for the other company (likely US-based) to contact me, then file a complaint, bu the US company will just innocently go, “Oh, we were just handed the lead by another company; we didn’t know they were violating the rules, we’ll cut them off immediately!” and the the illegal calling company will change it name and carry on.

        Dropping my land line helped. For reasons I can’t fathom, my cell doesn’t get telemarketers (but I do get SMS spam). Either way, this is likely only a temporary solution. We will eventually need spam filters for our phones.

        1. krellen says:

          The reason you cannot fathom is that it is illegal to market to cell phones, likely a (useful!) relic from the days when we paid for cell service by the minute.

          1. Deadpool says:

            Well, I can attest not all scams follow that rule…

          2. Alan says:

            I know about the cell phone exception. What baffles me is that if you’re willing to violate the Do Not Call list, to violate the existing laws requiring you to identify yourself, why are you going to be bothered by violating a law forbidding calling cell phones?

            1. BeardedDork says:

              As I recall the penalty for disregarding the Do Not Call Registry, is trivial in the US, but the penalty for calling cell phones is not.

            2. Decius says:

              They aren’t- SMS spam is illegal for the same reason voice calls are. Good luck getting anyone to enforce that.

        2. Steve C says:

          I really don’t know why law enforcement can’t simply follow the money and shut these kinds of telemarketers/fraud artists down. There’s always a company involved that the local country has jurisdiction over. Feigning innocence won’t work. Ignorance of the law is no defense.

      2. Deadfast says:

        Unfortunately the charities, religious organisations and of course the political parties themselves weaseled themselves exemptions from the register.

        Oh, it gets even better! The company tasked with maintaining the Do Not Call Register used the Do Not Call Register to make telemarketing calls.

  4. Tom Davidson says:

    Shamus, you might find this article interesting, as it describes pretty much your exact situation.

    1. Lalaland says:

      …Heather does paintings now and again, and sometimes works as an assistant for an antiques appraiser.

      I smiled when I saw this, my father is an antique dealer and I spent many wee hours of the morning in markets, etc buying stuff with him. I’m wondering if you’re as frustrated as I am by all these History Channel ‘documentaries’ on ‘pickers’ (WTF does ‘picker’ mean anyway?). They’re useless for someone trying to learn the trade as they never specify what makes Rusty Bicycle A worth more than Rusty Bicycle B and they treat an appraisal as a sale. FWIW I’ve always enjoyed playing ‘guess the value’ to the Antiques Roadshow (BBC version, I think PBS does it too?) at least there they explain why something is worth that much. Also they’re all that’s on bloody History Channel now, I thought they couldn’t be more tedious than in their Hitler Channel phase but by God did they find a way

      1. Yup. Exactly. The lady I work for laments “Antiques Roadshow” daily. We have actually done a similar thing (at a local cultural center). Unlike Antiques Roadshow we didn’t have a slew of people weeding out the crazies and as a general appraiser (with me as researcher) she ended up with the longest line and we worked for 13 hrs straight with no break because it was so poorly run. And I think we found one decent thing (in the $100 range). And I hate how people treat appraisals as sales. Value only happens when someone is willing to pay that, not what it “could” sell for. grumble grumble.

  5. Aitch says:

    In regards to the woman who punched holes all through the drywall of her house in a raging fit – of course I have no idea the circumstances of the loan or the reasons she wasn’t able to make it work. But from what I’ve heard there were a lot of shady people that scammed a lot of naive people with smooth talking, hand waving, and blurring numbers on these housing loans. Then the person would be left with an adjustable rate mortgage on a house that would normally be out of their price range (usually a normal, small place that’s considered the bottom tier of housing just above renting) where they could barely make the payments at even the lowest rate. They probably should have been renting instead, but it’s difficult to turn down the opportunity to own a home when what little income you can pull down is mostly going to rent and you end up just treading water with nothing to show for it at the end of the lease. So of course they took the offer to have a house. Then the banks turned on the juice, the rates skyrocketed, and we ended up with the recent mortgage crisis.

    Like I said, I have no idea if she was just nutty or vindictive, but in my limited experience it really takes a hell of a lot to get an average person to flip like that. Not just one incident, or a string of bad luck, but blow after blow like chinese water torture until after a bad day worse than most other bad days they get just one more call from one more robotic script spewing compassionless bank officer and just snap.

    A lot of them were young, didn’t know any better, and the people they were relying on to help them make a good decision decided instead to take advantage of them – and then they’re held responsible for the rest of their lives.

    So Shamus asks why a person would lash out at the bank? Imagine what they’d have to put you through for you to end up doing something similar, and not all of the time, but a lot of the time, it’s pretty close to what happened. For the most part I try to think we’re all doing the best we can. I don’t know, maybe that’s a fault of mine. She could have just been a spiteful person. Though usually there’s a lot of reasons – not good reasons, mind you – but when life feels like an endless helpless hopeless cascade of nonsense and people taking advantage and not being able to find even a fleeting spark of hope let alone an actual solution… the average person can only take so much of it.

    I’m guessing that she felt as if she had lost all control over her life, and did what little she could to try and reaffirm it, as desperate and petty as it was. But who knows. I certainly don’t.

    1. Mephane says:

      I can’t claim I would be completely above such a crazy reaction in that very bleak scenario you describe. I might be crazy anyway, however. *shrug*

    2. krellen says:

      A lot of the problem stems, I think, from the relative bounty of open space in the United States and thus the relative lower cost of housing. Of course, this bounty is largely a myth for over half of Americans; it doesn’t exist east of the Mississippi, but we all try to pretend there isn’t a huge cultural divide at that river and that the East is pretty much like the West. Thus people throughout the nation tend to think of housing as something cheap and affordable that everyone “should” have as a sign of being “grown up”.

      I’m not even sure this is true of the West any more, but it’s still a little more true here.

      Anyway, because housing is seen as a thing everyone should aspire for, renting is largely viewed as “wasting” your money; why pay rent when you could instead be investing that money into your home? What most people fail to realise is that owning a house isn’t “free money”, even if the value of your house increases. Owning a house involves a lot of ancillary costs that don’t go back into the value of the home: maintenance costs that are not value increasers, just value sustainers; local property taxes; the water bill, which is generally included as part of your rent in an apartment; and, perhaps the largest single item on this list, interest payments on your mortgage. Many apartments even include the utility bills.

      Once you factor in all those costs and realise they are also “wasted” money, renting looks a lot more appealing.

      1. Alan says:

        If you can afford to buy (and the market isn’t cratering…) buying is a reasonable investment. They key is that your landlord isn’t renting his property out of the goodness of their heart; they’re making a profit. Owning your own home cuts the landlord out of the equation; the landlord’s profit becomes your savings. It’s not the amazing investment people make it out to be, but it’s entirely reasonable.

        (That you almost certainly have a mortgage turns out to be mostly irrelevant. The overwhelming majority of rental properties are mortgaged as well so your rent already includes the costs of the mortgage.)

        1. Ian says:

          Absolutely this.

          I own a flat near the city centre and recently purchased a house which I and my wife moved in to.

          I would have loved to sell it and reduce my mortgage on the house but didn’t want to miss out on the property we really liked so went via the rental route.

          This makes me a landlord which is frankly terrifying.

          Even before my financial shuffle to get the best rates in the correct place, the mortgage on that flat was lower than my tenants are paying me. I’m not rolling in the extra cash but it’s basically paying for itself and enough money after everything else to buy a few interesting beers and a couple of indie games a month.

        2. krellen says:

          Rent is typically much lower than those costs would be for owning your own place; I currently pay less than $500 a month for rent, and I’m pretty sure those costs I listed would be well more than that if I tried to buy a house.

          1. Deoxy says:

            Unless your landlord is planning on going bankrupt or is ridiculously wealthy and just blowing money for the fun of it, you are paying all of those costs, plus a portion of the salary of the person managing it, plus profit.

            Owning is simply taking over the management job yourself and keeping the profit part.

            The only time it makes financial sense to rent instead of buy (when you could afford to buy, of course) is when you expect to have reason to move in a fairly short time frame (length of timeframe dependent on several things, but usually about 3-5 years), or you have good reason to believe that the housing market is about to MASSIVELY tank.

            This is true even for apartments, with the caveat that certain portions of the management can NOT be taken over, as they inherently apply to the whole building.

            I know several landlords, and all of them charge enough in rent to cover all of the expenses (including expected annual maintenance) and still have a profit left, not including the equity they are building.

            1. krellen says:

              Owning is simply taking over the management job yourself and keeping the profit part.

              The whole “Do-It-Yourself” attitude we have here – which this is a prime example of – exploits a fundamental problem most people have: they view their free time as completely valueless.

              You are never going to be as effective and efficient at doing thing X as someone whose entire profession is doing thing X. When you try to “save money” by doing thing X yourself, it is because you measure the time you spend doing thing X as costless.

              Most people do this because it is not “work time”, which they are already compensated for, and so it’s easy to see how they would view this time as worthless and thus easily expended – many of them couldn’t do things with their free time to be making money even if they wanted to.

              Folks like Shamus – working on contract or by page view and what not – don’t usually have this problem, because they’re used to viewing their time flexibly, and easily see their time as equal; they know that the time they are spending doing thing X is time not spent making their living, and thus more readily understand the sacrifice they are making by doing thing X (I do not mean to imply that “not working” is always the wrong choice, just that contract folks tend to be more conscious that their leisure time does in fact have value.)

              Your time is valuable, people. Don’t buy into the myth that it is not. Spend it doing things you want to do, and don’t saddle yourself with unneeded extra obligations.

              1. Alan says:

                It is a good point. It is important to place a value on your time. And it needs to be a real price you would charge someone else to do the work for them… as another job in addition to your existing job(s). Failure to do so will make you miserable.

                Buying into a condominium association will eliminate most of your time commitments, especially if you’re buying a condo in an apartment-style building. Of course, that costs money.

                If you have a standalone home, duplex, or similar, how much time your home will eat varies based on the size of the home, the size of the yard, what’s planted in your yard (ground cover is awesome!), the age of your home, and more. My own experience is that I’m okay with the time involved; It’s an hour or two a week, and what I get for my $60-$120 (Depending on how I measure my time’s value) is comfortably worth it.

                1. krellen says:

                  As long as you’re doing the calculus*, I’m fine with that. :)

                  (*Not actually Calculus)

              2. Deoxy says:

                All good points, and I’m well aware of them. As you yourself pointed out, most people have few other avenues of turning their free time into money, anyway, so the generic advice still remains quite good.

                BUT the point I was making is that non-professional landlords (people who have other jobs) that I know have done this calculation, and they make enough profit AFTER all of that to be worth their time, NOT INCLUDING the gain in equity. That is, their hourly rate for the time they spend being a landlord is decent, and the property equity is GRAVY.

                THAT is how much rent costs you – all of the costs you mentioned, PLUS decent profit, PLUS property equity.

                For a sizable majority of people, renting is a wasteful luxury – outsourcing home management to have more free time, when they don’t really have the money.

              3. Mephane says:

                I agree, but with a caveat. This entire line of thought becomes moot when you are tight on money anyway. Because then the only consideration is – is the money enough to pay bills, groceries etc. until the end of the month? Spending some of your money to save time, or vice versa, is only possible when you have an excess of the thing you are spending.

            2. Humanoid says:

              If the landlord is expecting their “profit” to come in the form of capital gains, then that’s not necessarily true. It’s common over here – indeed I’d almost say the norm – for that to be the case: rental income is less than the interest costs of the mortgage alone, but due to a tax quirk (“negative gearing”), this loss can be offset against one’s taxable income.

              In short, you get a tax break for making a technical loss renting out, but reap the rewards when property prices go up. Obviously if prices were to go down, the investor would be rather snookered, but the bubble hasn’t burst here yet…

        3. krellen says:

          I feel I should also point out that when I say “renting”, I largely mean renting an apartment (or a condo, or some other shared space), rather than a house. The idea that everyone should live in a house is a large part of the problem.

          New York City is one of the few places in the US that gets the idea right, with many people renting and many who do not getting mortgages on apartments, rather than individual houses.

          1. Alan says:

            I’m including condominiums when I talk about purchasing. A lot of apartments were converted to condos in my area during the bubble, so the comparison is very direct: you still have savings because many people live in a shared building, and you cut out the landlord’s profit. There is no reason that the mortgage + condo association fees should exceed the rental price.

            Of course, your mileage may vary. The specifics of owning and renting is highly location specific. Ultra-cheap condos aren’t common, so if you’re in an ultra-cheap apartment, there may not be a matching ownership option.

        4. Decius says:

          Renting has a major advantage in that you aren’t assuming the risks associated with catastrophic failure. If the roof starts to leak, it’s the landlord’s problem to figure out how to pay to get it fixed.

          This only applies where you are more risk-averse than your landlord, but less risk-averse than anybody offering insurance for those type of things.

          1. krellen says:

            I totally forgot to include insurance in the list of expenses renters don’t have. That’s another big one, especially if your landlord has multiple properties; bulk rates tend to beat out individual rates by a significant margin.

            1. Deoxy says:

              This only applies to VERY large landlords – companies who run multiple apartment complexes and the like.

              The landlords I know top out at about 30 properties, long before those economies of scale kick in, and they do have insurance as one of their costs. And it’s still easily worth it.

              And again, of course, they pass that cost straight on to their renters, so yes, renters do indeed pay that as well. RENTERS PAY EVERYTHING, and the landlord makes the profit.

              The only time the landlord comes out poorly is when someone does a large amount of damage to the property (and is poor enough to be judgement proof), but then, if you are a homeowner and do large amounts of damage to your own property, you don’t turn out very well, either, so I guess that still works fine.

              1. Decius says:

                I thought that part of the insurance available to landlords is insurance that covers damages done by tenants, which is why background checks are done and are so important. In which case it is a simple matter to pass that cost along directly, as opposed to assuming the risk directly.

                Insurance covereth a multitude of sins.

            2. BenD says:

              Renters should absolutely carry insurance, FYI, at least in the US. That said, it won’t cost you what homeowner’s insurance costs.

              The rest of this comment thread is all about whether renting is cheaper than buying and all I can say is that it depends on your local market. In my market, buying is better, period, no question. In the more-metro market 50 miles from here, it’s absolutely not better unless you plan to stay for at least 30 years (thus absolving yourself of mortgage and having a property with net increase of value, assuming a positive real estate market).

    3. Alan says:

      I think we, as a society, signed up for this sort of outburst. Over the last few decades any sort of trust between large businesses and individuals has been destroyed. It’s been made clear that as employees we’re interchangeable cogs to whom no loyalty is owed. As customers it’s clear that we’re annoyances to be treated as poorly as possible. It’s rational to assume that any large company must be treated as an enemy.

      In light of that, if one feels mistreated by a bank, why wouldn’t you lash out at them by trashing the house? You’re getting some satisfaction for zero cost.

      You can make a case that it’s unethical, but after a lifetime of small and sometimes larger injustices at the hands of companies who jettisoned ethics in favor of profits, I’m deeply sympathetic to someone who says, “Fuck it.”

      1. Aitch says:

        Very well said. It’s a shame things like that won’t fit on a t-shirt or a bumper sticker, cause I’m sure it’d cheer me up any time I read it.

        Also, somewhat alarming what kind of thoughts and assumptions fall into the category of “rational” when dealing with banks / government / corporate entities nowadays.

        I’m reminded of the way a garden patch overgrown with weeds will slowly strangle itself to straw in its own ceaseless avarice.

      2. Trix2000 says:

        That sort of thing reminds me too much of Ghandi’s ‘eye for an eye’ statement, though. Is it really right to sink to the sort of level where we too screw someone else over (even if it’s a company)?

        Of course, this is just talking from a moral standpoint – logically, it shouldn’t come to any surprise people do that sort of thing. I just worry about how little it actually contributes overall.

        1. Deoxy says:

          The only thing it contributes is a small attempt to make it unprofitable to screw people.

          Of course, it puts the same weight on the other side of making it unprofitable to try to avoid being screwed by them, as well, so it depends on how often you think it’s the one thing vs the other.

    4. kmc says:

      I think that’s a really important way to think about that kind of story. I generally try to remember that everybody is doing the best thing they know how at the time, and sometimes that’s not very good. Sometimes, it’s downright terrible and insane. But you’ve got odds on your side if you assume it’s because of what they’ve been through, whether you would’ve reacted that way in those circumstances or not. It’s kind of like the story my mom tells me when she and my dad were first married, and she tells me now that she was still coming out of her conformist religious upbringing’s influence (for what that’s worth). They passed a car where the driver looked unhappy and she said, “Why do some people just go around looking like their best friend just died?” and he said, “Maybe they did.”

      Anyway, that’s kind of a long road to a little house, but the point is, even people acting out of spite have often gotten there through the desperation of repeated injustice, and sometimes people feeling powerless take advantage of the only agency they think they have left.

  6. Neil W says:

    I’m not an American, but I have worked in a financial services call centre. There’s a lot of stuff that we had to legally say and/or confirm, and other things that were “best practice” put into place because some of us were, let’s say, minimally competent and sometimes had had sleepless nights up with sick children/drinking. They give you a house and they get some paperwork back. They really need to make sure the paperwork is right, which is cumbersome over the phone.

    Not to say that it couldn’t be handled better. Having one person deal with your case would keep repetition etc. to a minimum, prevent deadlines being passed, the whole paystub thing being a one time question, and gnomic notes written on the file actually making sense as the person reading would be the person who wrote them.

    1. Robyrt says:

      I can confirm that from my experience in American call centers, and from the financial services industry. The whole tiresome script is there to verify that you are who you say you are, and that you are actually still living there. A significant fraction of people in the foreclosure process feel super guilty, angry or paranoid about it, and will avoid taking calls from the bank, give the phone to someone else, or flat out lie to you.

      Also, the call center is managed for maximum accuracy at minimum cost, not maximum efficiency. The bank is a lot happier if your loan sits there past due for 90 days than if they lose track of you and can’t find you for 900 days.

      1. Flakey says:

        Mentioning that the calls are recorded is legal requirement. The name address and phone number is a mix of legal, confirming your actually speaking to the correct person, and putting the information onto the recording so people listening to it later, for spot checks to evaluate the agent, or if there a dispute over the call further down the line, can confirm by listening to the recording that they have the correct account matched up to the correct call.

    2. Having one person deal with your case would keep repetition…
      Oh, how I wish this was true. When I bought my house, I dealt with the same person every time, who repeated the same questions over and over. I think explained the basic math of calculating my yearly income from my paystubs (not a very complex thing) to my loan officer probably 4-5 times over the six months it took to buy our house. (Similar to Shamus’s story above, we had ever-expiring documents to deal with).

      1. Mari says:

        Amen to this. We recently went through a mortgage application process and dealt with the same person the whole entire time. It was six months of repetition, constantly expiring documents that had to be resubmitted because they sat on a desk at the lender’s end too long, weeks spent not being able to get in touch with the guy then suddenly getting a call demanding a slew of documents (like 5 years of tax returns – our returns average 20+ pages per year) tomorrow to avoid document expiration, the whole nine yards. Only to end with “Oh, hey, there’s this thing that I should have noticed in the first week of the process that disqualifies you for the loan. So sorry you wasted six months on this. But you might have more luck applying with a bank that deals more often with agricultural lending since they probably won’t have the silly rule that disqualified you with our bank.”

        Now we’re lathering, rinsing, and repeating with an ag bank and again dealing with one person. So far it’s been nine weeks and despite calling and riding him twice a week that entire time (except for the three weeks he was away from the office for “training”) we haven’t actually managed to push him hard enough yet to make it to the point of actually FILLING OUT AN APPLICATION to officially kick off the loan process. He’ll ask one or two questions over the phone and then sit on that for a week or two. Then ask another question and sit on it. We’re hoping he might get around to asking for social security numbers sometime this summer…

  7. Cuthalion says:

    Ugh. That sounds miserable. Makes me glad I’ll be renting for awhile. Which I’m sure will come with its own problems. D:

  8. Lalaland says:

    …Heather does paintings now and again, and sometimes works as an assistant for an antiques appraiser.

    I smiled when I saw this, my father is an antique dealer and I spent many wee hours of the morning in markets, etc buying stuff with him. I'm wondering if you're as frustrated as I am by all these History Channel “˜documentaries' on “˜pickers' (WTF does “˜picker' mean anyway?). They're useless for someone trying to learn the trade as they never specify what makes Rusty Bicycle A worth more than Rusty Bicycle B and they treat an appraisal as a sale. FWIW I've always enjoyed playing “˜guess the value' to the Antiques Roadshow (BBC version, I think PBS does it too?) at least there they explain why something is worth that much. Also they're all that's on bloody History Channel now, I thought they couldn't be more tedious than in their Hitler Channel phase but by God did they find a way

  9. Pat says:

    As a screenwriter, I feel compelled to point out that only character names and dialog should be centered in a script, not the scene heading and description. Also, you don’t need colons after character names in dialog and there’s no need for OFFICIAL DOCUMENTS to be capitalized.

  10. Strangeite says:

    I am afraid that this won’t help the Young family now, but after year’s of experience working with real estate (an appraiser and investor), there is one piece of advice that I give that is far more valuable than any other.

    Never work with a large national bank.

    Always bank with a either a small credit union or small regional bank. They service their own mortgages, if for some reason they need to call, it will almost always be the same person, they have the ability to cut through bureaucracy better than multi-national behemoths and you can walk in to talk to the person handling your case face to face.

    Yes, you might pay an extra $50 a month on your payment (usually not though) but the advantages FAR out weigh the negatives if something goes wrong.

    1. Dave B. says:

      I must second this. From my own experience, working with a good community bank is far better than trying to deal with the bureaucracy of a larger bank. Obviously, it depends on the banks in your area, but finding one you trust is invaluable.

    2. Mari says:

      I would second this except, in my experience, it doesn’t much matter because in the end it’ll be sold to a large bank chain anyway. Plus, our local community banks got out of the practice of mortgage lending back in the early 2000’s because it was too risky. People who lend hundreds of thousands of dollars to a single farmer to hopefully grow plants IF the weather cooperates that will hopefully make enough to pay back the loans IF the commodities markets stay high enough to make the crop profitable decided (before the housing market collapsed) that loaning money for houses was too risky. I wish I was making that up but I’m not.

      1. Yup. We started with a smaller bank. It got sold 5 times. Our regular bank IS a small bank and if we ever DID choose to have a loan again then it would be through them.

        1. Strangeite says:

          That sucks. I have two regional banks and a small credit I work with and I have never had my mortgage sold.

          Granted here in Kentucky we have a robust market for small banks.

      2. Strangeite says:

        Not to butt in where I don’t belong, but have you tried AgCredit?

        They aren’t exactly the small guys I was recommending but every farm I have appraised from an AgCredit loan seems to go smoothly and the farmers are happy. They understand up front that I need to do soil composition analysis, etc. to do a fair estimate of value.

    3. Steve C says:

      The same is true for insurance. Get a local insurance broker. Don’t use a national outfit directly. The online deals aren’t deals. The middleman is adding value you need. You need to ensure that it’s in your insurance provider’s own best interest in paying out a claim to you.

      When a direct insurer denies a legitimate claim they make more money. When an insurance broker denies a legitimate claim they lose a customer and hurt their local reputation. When you have an insurance claim you want someone you can look in the eye, dump the paperwork on their desk and tell them to handle it.

      1. Syal says:

        When a direct insurer denies a legitimate claim they make more money.

        Assuming the claim is more than it will cost them to pay their lawyers to deal with the ensuing lawsuit.

        1. Steve C says:

          Kind of. If the claim is small then the company bets on the chance that you’ll not bother. If it’s big, then it can be worth it to deny. Remember that insurance companies are the undisputed kings of statistics and playing the aggregate so it’s in their favor. They know the odds and play them. That’s their business.

          Some of the insurance companies have a policy of deny X amount of claims just as a matter of company policy. It was quite an eye opener when I saw an investigative journalism segment about it. But it is logical from a statistical standpoint.

          1. Deoxy says:

            This is why it’s generally a good idea to go with larger companies that cost a little more – they don’t ride as close to the margin, and only their good name allows them to charge more. IN GENERAL, you are more likely to get your legitimate claims paid with no hassle… but only in general – I’m sure they do at least some of that stuff, too…

            1. Steve C says:

              We are going to have to agree to disagree. I say stay away from large insurance companies like the plague. With a large company you don’t matter. But you do matter to a local broker. The broker matters to the large company. The broker ends up being a customer of the large company as the company buys your portfolio off the broker.

              If you have to make a claim, it’s been a bad day and you have sudden problems that need your attention. The broker acting as a buffer is super important when you have to make a claim. The broker ends up being your UI to this complex system of bureaucracy.

              1. Deoxy says:

                Oh, I agree on using a broker (I use one myself), I was just saying to get a broker for a big name company – they have a reputation to keep.

                1. BenD says:

                  I would agree with this. Local representation and accountability, but at LEAST large-regional connections and capacity. If your national or subnational insurer of choice won’t assign you a single human being near your home as your agent, it’s a bad sign.

  11. Raygereio says:

    And are there any other contact numbers where we can reach you?
    (This is a trick question. If I mention my wife's cell phone, they ask me to recite it. If I say no then THEY recite it and ask me if it's still valid. If I say “no” they will always ask me about this number anyway, every time, forever and ever.)

    Maybe I’m missing the point and/or joke, but what’s the trick in the question?

    1. Shamus says:

      There’s no way to avoid going over this number. One way or another, one of us is going to recite this number.

      1. Raygereio says:

        Whelp, that one flew over my head at sizable speeds then.
        I was disecting that question looking for a way it could trick you into digging your own hole or admitting some disadvantageous somehow.

  12. bucaneer says:

    Just because you mentioned Snake – I never thought of it as a game with an explicit winstate, but apparently it can be won.

    1. Syal says:

      …that video should not have had black space along the sides. I was 3/4 of the way through before I figured out why the snake never went past a certain point.

  13. Mikeski says:

    Having dealt with and/or worked for Large Faceless Corporations before, I think I know where some of the incompetence comes from.

    1) The corporations don’t care. The bottom line is “Which division is making us money? Make them better!” Foreclosures don’t make any money. They just lose the least money. So they get no love from the “greatest return for our shareholders” crowd, even though, logically, they should. It’s like the bean-counters don’t understand that a smaller negative number is as good as a larger positive one.

    2) Everyone else was doing the same dang thing, all at the same time. Before the property-value meltdown, they didn’t need that many people doing foreclosure stuff. Suddenly, every bank needed tons of them.

    So you get a whole pile of newbies, who the vice-presidents-and-above view as something parallel to a cockroach infestation, and who spend almost all their time dealing with pleasant folk like punch-holes-in-the-wall lady. Not a formula for excellence.

    1. It is endemic to many organizations (and they don’t have to be huge to have this problem) that the people who are most affected by and care about a given decision have absolutely no say in it, while the people who DO have power over the decision are completely unaffected by it and can’t be bothered with it. Thus, nothing useful gets done. The rationale for this is always something along the lines of: “You can’t trust those dirty thieving peons at the coalface to make DECISIONS!!!!!! ALL THEY DO IS CHEAT AND STEAL AND WRECK THE COMPANY!!!!!”

      Oh yeah? So why did you hire them in the first place, bozo?

      I think “Manager” ought to be the highest-jeopardy job in any organization–they contribute the least value and if they’re not good at their job they actually destroy value. A lot of organizations make the mistake of thinking that the person over the Manager doesn’t need subject-matter knowledge. They need MORE than the Manager does. A manager CAN manage a team where the manager doesn’t know much about the team’s subject matter–if there’s a VP or Director over them who *does* know it and can set clear, specific goals. A VP or Director without subject-matter knowledge is an empty suit regardless of the expertise in his/her department. Managers you can bring in from outside. Directors and VP’s ought to be promoted from the coalface. VP’s and Directors don’t need “management” skills, they need SKILLS skills. The C-level employees manage *them*.

      1. Deoxy says:

        I am of the opinion that MOST managers cost the company money, even before their salary is included.

        I am also of the opinion that there actually are management/executives who are worth exorbitant, 8- or even 9-figure incomes – that the company makes more money, due to their presence, than they cost, even with those large salaries.

        The problem comes from 2 things: lack of accountability for managers/executives to actually bring value, and lack of accountability for those hiring them to bring value.

        I used to joke frequently (and still do occasionally) that the best paying job in the country to a serial executive – get executive job, get canned as quickly as possible. Lather, rinse, repeat.

        That this would actually work (and 99% of people in this country could retire comfortably after the first time, much less the second, without ever having added any value of any kind) shows just how ridiculous the effect of graft is on human society: the US has these ridiculous situations that waste tremendous amounts of work time and resources, and yet, until the last 20 years or so, the US was easily top dog in the world economy, simply by having a slightly lesser problem with graft than everyone else.

        1. Syal says:

          Part of the problem is when someone’s job is ensuring other people do their job it quickly becomes hard to say who’s actually responsible for that job getting done.

          Of course you can move people around, but that creates its own problems.

      2. This is the problem with doing things using hierarchy in the first place.

  14. Lazlo says:

    Here’s a really fun one for you, apparently at my bank (and probably at some others), property addresses are considered immutable. That makes sense, because it’s not like you’re going to pick up your plot of land and move it to the next state over. However, between the time that I bought my house and now, our zip code apparently got a little bloated, so we got a shiny new one (that still isn’t in some databases of zip codes, leading to online orders that don’t believe my address exists… but that’s another matter). Since that time, the Post Office has stopped delivering mail to our address if it uses the old zip. So I *have* to change my billing address, else I won’t get bills. But now my billing address is not the same as my property address. So obviously I’m not living in the property, right? Ermmmm… dammit.

  15. stratigo says:

    the reason people smash houses when banks foreclose is because banks will often foreclose essentially arbitrarily and evilly. I remember a story about a retiree who started getting mailed the wrong mortgage bill at a much higher rate. He had a crappy lawyer that didn’t advise him correctly after the fault was caught, but the bank acknowledged that they were in the wrong. And then they foreclosed on him because he hadn’t paid his mortgage bill. He had been trying and failing to pay someone else’s.

    If the bank is jerking you around and screwing you, chances are they are doing it when you have limited funds, or are causing you to have limited funds, and so you have no legal recourse because you can’t afford the legal fees required to successfully fight them in a court of law. A bank can come in and essentially screw financially troubled people in any way they want because they have money and the other party doesn’t.

    1. Deoxy says:

      Yeah, the “I made a good faith effort to pay, but you made it impossible” doesn’t keep them from foreclosing, and that sort of thing does drive some serious anger their way.

      There are actually even worse examples than the one you cited. In particular, there is the example of the bank foreclosing on someone who had bought their house flat-out – never had a mortgage on it AT ALL. That one is pretty impressively bad.

    2. SlothfulCobra says:

      That’s really just the reality of dealing with any massive system that deals with thousands of people just like you. Your life may be important to you, but you’re just a drop in the bucket to them. They don’t think about every single person on their list, so any action they make will seem arbitrary on the other end. There’s bound to be at least 10 people between you and anyone who actually makes decisions in the company, so there’s sometimes no getting through to them.

      The fact that this sort of bureaucracy exists in real life is what makes stuff like the rogue cells in Cerberus plausible.

      1. Syal says:

        It still doesn’t make Cerberus competent though.

      2. stratigo says:

        The difference is that the problems are caused by the bank messing up,and instead of correcting their errors, they punish you because they screwed up. And since they are punishing you, they’re probably draining you of cash and you have no ability to defend yourself through methods that you legally should be able to.

  16. Z-Ri says:

    I love these personal posts, learning about other peoples experiences in general is something I just find really cool. Though it is kinda strange thinking I discovered your site right in the middle of all this.

    On the subject of Lincoln logs.

    My grandmother has an old set of Lincoln logs with the (not so intact) tin they came in and it does look exactly like what you buy today. That is pretty impressive, off hand I can’t think of single other product that hasn’t changed in some way since it went on the market.

    1. Mari says:

      We have a couple of vintage Lincoln Log sets but one of my kids was into building vast, sprawling frontier cities so we picked up a few newer sets to go with them. There were some additions in the newer sets – namely some plastic figures and animals, plastic windows and doors, and these plastic triangle things to create gabled roofs with the green sticks. Oh, and one of the new sets came with plastic crenellated parapets that drop straight into a square tower for the construction of forts. I’m fairly sure original Lincoln Logs didn’t have plastic bits.

      But once the sets had been mixed you literally could not tell which logs or flat sticks had come from an old set and which had come from a new set unless you looked for the dried glue (some of our old sets belonged to a kid that apparently did not want his creations disassembled).

      1. Deoxy says:

        Yeah, I was going to mention the plastic roof-holder bits as new-ish – think they were added in the 80s? That’s still pretty new, by Lincoln Log standards.

    2. Humanoid says:

      Until this post, I’d never heard of Lincoln Logs, were they ever exported?

      As far as I know, the legendary Koss PortaPro headphones are the same today as they were when first launched in 1984, right down to the retaining screw intended to accommodate an add-on microphone, which to this day, 29 years later, has failed to materialise.

      I’m also of the belief that even after those 29 years, they’re still the best headphones you can buy for under $50.

  17. Dreadjaws says:

    Wow, this was as close as 2011? Darn, I had thought it was further back in time. I mean, I realize the story spans for several years (the title gave me a clue), but still, I thought the problem would have been solved before.

  18. And all through this you keep blogging away and not mentioning with so much as a word that you might be having the slightest spot of money problems? I have to say I find that impressive.

    1. Syal says:

      In fact, I distinctly remember something about “52 cents profit”.

      I feel betrayed.

      1. krellen says:

        I remember him saying something about him making about $1 per hour working on the blog. Hopefully that number has gone up a bit since then.

    2. BenD says:

      I actually completely remember a point where I was aware that there were money problems with Shamus & Family, but I can’t point to a blog entry that said so. There was more blogging about the ad revenue. Blogging about the day job ending. Blogging about the book and sales thereof. The donation button (quietly) appeared. Stuff like that. It painted a picture, I guess.

  19. Paul Spooner says:

    So, being a programmer and engineer, did it ever cross your mind to automate the whole “answering the boilerplate” portion? Just record yourself giving the responses, and play them back with the proper delays? Or even just get a terrible text-to-speech program and have it respond. It would be kind of neat to robo-answer the questions so you can do something else at the same time. Entertainment value at least.

  20. Clint Olson says:

    > The next time they call me they act like I'm a band new case and ask if I would like apply for the loss mitigation program.

    Did you mean “brand”?

  21. daemon23 says:

    Things I have learned about the whole foreclosure/short sale process, which may or may not be interesting or informative:

    Banks haven’t really wanted to foreclose for the past few years when there is significant “shadow inventory”–houses which should be foreclosed on and sold off. The problem for them is that foreclosures drive down the value of neighboring houses, which themselves may be soon-to-be foreclosed on or sold, which means they could lose even more money. They really don’t want to crash the housing market if they can avoid it. Further, by letting you stay there, it’s very likely you will maintain the value of the house and not let it go to rot. On top of all that, they packed up and sold your debt off in the CDOs–the mortgage losing money doesn’t hurt them, it hurts their CDO investors. All that combined leads to institutional foot-dragging on the part of the banks, who have little reason to care one way or another that they get paid, but some reason to avoid allowing the property to lose any value.

    Recently in some markets, some banks have solved the foreclosure issues by finding institutional buyers to snap up the houses in blocks before auction. This may be coming to an end, as the draw was the extremely low interest rates, and even the extremely modest increases are reducing profit while increasing risk. Also, investors are avoiding mortgage-backed CDOs, so while old foreclosures may still be in that legal limbo, newer mortgages probably won’t be so disconnected from the servicing bank.

  22. Rod says:

    We should impose elaborate validation schemes on drones who call us and ask for our Social Security Number. How do you know he’s actually calling from the bank?

  23. Vipermagi says:

    “Hello I'm [Guy] calling on behlf of [bank].”
    Words. They have letters. :)
    (I have nothing useful to say)

    1. Jarenth says:

      Tell that to [Guy]. I’m sure his supervisor doesn’t allow him to use that a.

  24. SlothfulCobra says:

    If the banking companies seem incompetent to you, that’s because they are. There’s no real competition in the banking world, and there are few enough major banking companies to be just barely outside the official definition of an oligopoly.

    One of the causes of the mortgage crash was banks getting too eager in giving mortgages (which they could later sell off to other investment banks for a much faster profit). To that end, they got sloppier and sloppier in checking the backgrounds of applicants (sometimes not even checking at all). Many people, like you, were approved for mortgages that were much larger than their income could support. Once the housing bubble burst, all these mortgages backed by nothing but wishful thinking plummeted in value, becoming what is known as a “toxic asset”. In many cases, the bank is entirely responsible for the mess.

    One of the reasons why renegotiating is so complicated is because many mortgages were divided into bits and then repackaged, so it’s up in the air who actually owns any single given mortgage. Life isn’t easy dealing with a toxic asset.

    1. Decius says:

      It’s not fair to say the bank is entirely responsible for the mess; many people failed to do their own due diligence regarding what they could afford, assuming that the bank was making sure that they weren’t giving a loan to somebody who was simply not earning or expecting to earn enough to pay for it.

      “I thought you were making sure I could afford this” is an indictment of the speaker, not an excuse.

      1. Jeysie says:

        That’s kind of like saying you’re supposed to make due diligence on finding out whether or not you need a certain medical treatment, or what needs fixing on your car, as opposed to getting to trust that someone who has a degree/training knows better than you about a topic and will be able to instruct you.

        So if a financial person is deliberately or accidentally giving false information to someone on a topic they’re supposed to be the expert on because that what you’re paying them to be an expert on, then IMHO it very much is a valid excuse if you only screwed up because you operated on their false information.

        We should be putting the blame on the people who were supposed to be doing their jobs correctly, not on the people relying on folks to do their jobs correctly. Mainly because the problem will only be properly fixed by people finally doing their jobs correctly.

        If we had to be expected to be experts on every single topic, and do every job ourselves, life would quickly become untenable.

        1. BenD says:

          And yet, becoming a jack of all these trades is the only way to ensure you get decent quality of services in the US. (I don’t know that it’s different in other countries, but I can hope so.) If your doc suggests a diagnosis or treatment, you need to be Googling that before you make any major decisions. If your mechanic tells you that you need a $17 fan belt, you might say fine because your time and energy is worth way more than $17, but if he wants $1700 for a transmission you either need to learn or know something about cars and transmissions, or ask someone else who does. (Unless that’s pocket change for you, in which case, let me know how I can send you the bill for my next major car repair.)

          This is frustrating, but it is how our society is currently built. There is little punishment for people who are not good at their jobs, especially in service fields, unless they happen to work for an organization that accurately reviews customer-facing performance and actually acts upon that information. Meanwhile, there tends to be more than adequate reward for scamming people. You get more commission selling an $800k home than a $400k one. You get more money selling a more expensive treatment or repair than a cheap one (or none at all).

          Blah blah big corporations and social reform blah blah stuff we don’t talk about on Shamus’ blog. :)

          1. Alan says:

            Which takes us back to people angry enough to damage a house they’re losing in foreclosure…

  25. kdansky says:

    You treat the bank way too nicely. Don’t put all the blame on your shoulders and try to appease them. Try to get out with your hide intact first, then be nice to a big conglomerate which is all about screwing over its “customers”.

    Banks don’t give out prizes for their best-behaved customers. It’s much more important to get to a solution that just works for you. It’s not about revenge, it’s about survival. Don’t throw yourself under the bus to save the bank a few ten thousand bucks.

    1. SlothfulCobra says:

      I can understand where he’s coming from. If you’re stuck with a bad place, you don’t want to foist all your problems on someone else, because that’s just spreading misery, and it definitely seems wrong at the end of the day.

      Of course, morality always seems to blur when you’re dealing with specifics. Maybe the bank isn’t a person, it’s a faceless organization. Maybe the bank is partially responsible for the trouble, and is more capable of dealing with the loss of money than an individual is, and they happen to be in the business of gambling on investments.

      Either way, it never feels good when you know that you’re partly responsible for a failure that could have been avoided. Honesty is easier than building up a web of lies anyways.

  26. Bryan says:

    which means this entire year-long game of phone tag of paper-filing has been in pursuit of a mortgage that's still too much for me to handle. They should have realized this ages ago. They had the information to figure this out from the first round of paperwork.


    Yes, and I believe you’ve also said something like “people assume that Those In Charge know what they’re doing; the vast majority of the time, they don’t”. (I believe at the time, you were writing about middle management in general — or possibly upper management of video game companies — but don’t remember the context and can’t actually find the quote anymore either. :-/ )

    I wonder if this is what made you start to think that, or if you thought it before running through this game of phone-tag and paper-filing.

    1. Kavonde says:

      Shamus used to work at Taco Bell, and he’s shared a few stories about it. I’m pretty sure that’s where his opinion on managerial competence first started to form.

      Really, though, I’d like to think that almost anyone who’s worked retail or service would tell you the same thing.

      1. Corran says:


        “Any time you have a system where there are several layers of separation between the decision-makers and the decision-implementers, you're going to have these situations where the left hand is feeding the right hand into the woodchipper.”
        — Shamus Young

        1. BenD says:

          Shamus, you should absolutely curate a list of your best witticisms and wisdoms, then publish it. Money in the bank. Let me know if you want a free proofreading!

  27. Daemian Lucifer says:

    Ugh,bureaucracy….I dread the inevitability of me having to change both my drivers license and my identity card.Both are expiring soon,but also my country had this brilliant idea of introducing new ones for some reason.These new ones are supposedly better because the hold all the info on a single strip and everything is stored in a computer,but the thing is:They are still completely useless.You always have to provide an additional id,and the papers used to get these are quite often asked for to get other stuff,like passports,because…redundancy is cool I guess.What is the point of having an id that has your fingerprints on it if you always have to have a spare?

    And thats all not going into car registration which….Ugh,I hate car registration!

  28. Decius says:

    Referring to your penultimate paragraph:

    You got an incompetent bank; I got a malicious one. Among other things, Ocwen FSB would ‘lose’ a payment mailed to them, imposing large additional fees. When the replacement payment arrived, they would cash both checks (often putting the homeowner into overdraft, for which Ocwen would apply additional fees &tc).

    This was apparently their standard practice for all of their ‘customers’.

  29. ENC says:

    Also, US Banks sound like trash. They’re fairly well regulated here in Aus, and we never really had a technical ‘recession’ due to how well liquidated the economy is. But I hear things were quite bad over the hills and far away.

    Also a few government laws came in in order to improve transparency here; now all the banks are compared against each other in almost all regards. For something as simple as a transaction account I can literally get them for free now with no fees of any kind.

  30. Anon says:

    And a possible reason for the frustrating process — employees were encouraged not to modify loans.

    Bank of America's mortgage servicing unit systematically lied to homeowners, fraudulently denied loan modifications, and paid their staff bonuses for deliberately pushing people into foreclosure: Yes, these allegations were suspected by any homeowner who ever had to deal with the bank to try to get a loan modification ““ but now they come from six former employees and one contractor, whose sworn statements were added last week to a civil lawsuit filed in federal court in Massachusetts.

  31. Kultra says:

    You know Shamus, I was reading the news today and honestly this reminded me waaaaaay too much of your situation.

    Of course, I don’t know if you were using BoA but if one of the biggest banks in the US was doing it, I don’t doubt others were too maybe less cynical about it tho.

  32. Austin Middleton says:

    Originally posted by Shamus
    I should not be setting the price. In fact, I have no right to do so. I mean, by setting the price I'd implicitly be deciding how much money they would lose.

    You’re making an error here. You don’t set the price. You ask for a price. Buyers can choose to accept that price, reject it, or attempt to bargain with you. The interaction of the buyer and seller discovers the price; nobody sets the price because no one can be compelled to purchase it.

    1. Tizzy says:

      But by setting a price, you also: (1) establish a ceiling for how much the house will sell for; (2) set the tone of any possible negotiation (as in: that guy is way overvaluing his house, what’s the point of even making an offer…)

      So there IS responsibility in choosing that number.

    2. Deoxy says:

      Only under very unusual circumstances does anyone offer MORE than the initial asking price.

      “Setting the price” is thus “setting the MAXIMUM price”, which, in a case of losing someone else’s money, he shouldn’t be doing.

      1. Austin Middleton says:

        @ Tizzy and Deoxy,

        You may as well say that nobody pays more than the reserve price of an item at auction. Certainly this is not at all the case for most of my experiences on eBay.

        The housing market it similar, though there may be fewer bidders on any given house. Deoxy’s “unusual circumstances” for the purchase of a home for more than the asking price occur in a “seller’s market”, when there are few homes for sale, and many people looking to buy in that area. This was the general state of things from ~1998 to 2006 before the bubble burst. It was then common practice to actually ask for a price lower than you thought you would get in order to encourage a bidding war between buyers’ escalation clauses.

        Since 2006, you’re quite right: it has become less usual for houses to sell for more than the asking price; but this is more because of owners’ downward rigidities in the perceived nominal value of homes, and not because of any maximum price imposed by the initial ask.

        In any case, Shamus does not “set the price” when he asks.

        *I should say that yes, it does indeed help set the tone for the negotiations, but does not act as a binding constraint.

        1. Shamus says:

          In my dealings, it’s always been understood that when you “set the price” in real estate you’re setting the asking price, and throwing “asking” in there is superfluous.

          Either way: The point stands. They’re a bank with massive experience, tons of data, and everything to lose. I’m just one guy and I have nothing to lose.

          To illustrate my point: Why don’t I just put the house on the market for a dollar? In a short sale, I get nothing no matter what I sell it for.

          They MUST set the [asking] price because this doesn’t make any sense otherwise.

          1. Alan says:

            My understanding is that once you and the buyer agree on a price, the bank has an opportunity to veto the sale. Presumably the bank will do this if they don’t think they’re getting enough money. Which gets back to your original point: the bank has a lower limit; why won’t they just tell you what it is up front, or set the price themselves?

          2. Austin Middleton says:

            @ Shamus

            Rick Harrison would disagree: what people ask for something isn’t the same as what they get for it. The “asking” part is critical.

            And yes, banks have tons of data and enormous resources. But the problem with that is that they have tons of data and enormous resources. That kind of institutional inertia is damned hard to maneuver, and while the bank may have something to lose, an individual bureaucrat doesn’t; he’s as unmotivated to maximize the contract as you are. The frustrations you express in dealing with large financial institutions are also felt by their shareholders.

            What banks don’t have is experience; people have experience. And the banker assigned to your particular case may not have experience in your local market. Three blocks from my house home prices go up by about $150,000. Not because the houses are nicer; because it’s in a different school district. Someone who works in this area will know this distinction; a banker from St. Louis may not know the difference between Fairfax and Falls Church. They’ll have a harder time pricing it than the person who lives there. “Economies of Scale” get all the press, but Diseconomies of Scale are just as important. So they let you ask a price, and rely on purchasers to discover the sales price.

            Starting with an asking price of $1? Perhaps this fellow could tell you what would happen, and in a jolly English accent to boot.


            Perhaps they’d like to, if not for some of the reasons above. Perhaps it’s also illegal, since the home is not an asset of the bank until they go through foreclosure proceedings; until then the house belongs to you even though it is collateral against the liability of the original loan.

            1. Shamus says:

              All of this hair-splitting and nitpicking does nothing to change the initial assertion: I shouldn’t be setting the price.

              The bank must approve the price. A house market is not an auction. An auction takes place if we fail to sell. If someone made an offer of $1, the bank would reject it. So the asking price should AT LEAST be at the point where they wouldn’t reject the offer outright. Otherwise we’d just be wasting everyone’s time. Can you imagine: I ask for $50k, someone offers $50k, and then their offer gets rejected? That would be completely screwy.

              Keep in mind that they did eventually set the price, and they were VERY particular about it. It just took them bloody ages to make that happen and in the meantime they gave me incomplete instructions simply because they were disorganized. The person who told me to put the house on the market didn’t understand how it worked or what needed to be done. When I was handed off to a new caseworker, the new person figured it out and set the price.

              1. Austin Middleton says:

                I’m sure it seems like hair-splitting. I’m similarly sure that over the past decade since I read DM of the Rings I would have thought the same way about some of the distinctions you made in your commentary on programming. Enjoyable nonetheless, by the way.

                The difference between “setting the price” and “setting the asking price” reflects the differences between competing theories of price and value, a debate that has persisted among economists since before Adam Smith articulated the water-diamond paradox in 1776. It still persists. Your predicament, and that of thousands of other Americans, I lay chiefly at the feet of those bureaucrats in DC and the Fed who did not, do not, understand the meaning of prices or the havoc caused when you muck about with them.

                Language matters, and this is a nit worth picking.

                1. Austin Middleton says:

                  And to make perfectly clear: if your claim is that you should not be the first mover in a real-estate transaction over your asset that is collateral on a loan you can’t pay off, well, there are reasons for and against. Perhaps you should not be setting the asking price; you don’t think so, at least, and I’m not trying to tell you what you should think.

                  My point is that there is a real and significant difference between “price” and “asking price” in both in common usage and and technical definitions, and to conflate the two can lead to fantastically destructive policies.

            2. Alan says:

              It is a shame that there aren’t people who specialize in appraising the value of properties. They could help banks identify appropriate prices for short sales, and they could verify that people getting new mortgages aren’t misrepresenting the value of the home.

              1. Austin Middleton says:

                That’s just it though: a home has no value beyond what someone is willing to pay for it. You’re looking for a specialist in predicting other people’s aesthetics and preferences. Local Real Estate agents attempt to do this, and their performance is certainly better than the average homeowner’s, but that profession carries its own unique baggage that can muck up the works just like dealing with a national bank.

        2. Deoxy says:

          People only go above the reserve price when there are other people bidding on the item.

          In most housing markets, most of the time, each offer stands alone, as there are not people lined up to bid on the thing. Only in “unusual circumstances” is that happening – your example would be “some areas of the country, during a few years”. That’s not remotely the norm.

          In the vast majority of non-auction cases (housing and otherwise), if I am willing to pay your asking price or more, there’s no haggling: I say I’ll take it, and you say OK. Done. Housing involves more paperwork, but in the vast majority of cases, that’s still how it works.

          Why would I offer more than your asking price, unless it’s an auction? You already said you’d sell for that price.

          Occasionally, the market is busy enough to make most transactions auction like. Occasionally.

          1. lplimac says:

            I don’t know where you live, but in Southern California this is the norm for the past two years; people are getting multiple bids on houses they put up for sale. A person in my office just bought a home, he put bids on at least 5 houses prior to the one he bought; he started the first house at 5k above asking and was outbid. Ditto for the next 4 houses. He outbid the others on the last one which he bought (and went 20k over the original asking). The only way you can avoid this if you are willing to pay cash and not with a loan. Otherwise, prepare to be in a bidding war.

          2. Austin Middleton says:

            In most housing markets, most of the time, each offer stands alone, as there are not people lined up to bid on the thing.

            The market you describe is one where only one purchaser is willing to bid on the house given the asking price. In this case, you would expect the house to sell for less than the ask. If this were true for “most housing markets, most of the time”, then the general trend you would see for the entire market would be falling housing prices.

            Sometimes this happens; the past 7 years have been characterized by an overall drop in prices of around 15-30%. Some places not so much, some places much worse. But this was preceded by decades of rising house prices, fueled by a mixture of inflation, rising productivity, and innovations that permitted access to credit. This is hardly a few years in a few places in the country, and hardly unusual.

            Why would I offer more than your asking price, unless it's an auction?

            Because you value the home more than the asking price, and you think others will feel the same way; so you offer more in order to ensure that you get the contract. Potential competition has the same effect on purchaser behavior as does auction-style competition. If you’re interested in the scholarly work done on the subject, here’s a start:

            The Role of Potential Competition in Industrial Organization

            You’re quite right to say that market conditions have to conspire to produce these results, but these conditions are hardly as abnormal as you suggest.

            1. Deoxy says:

              Again, I’ll just point out that it only happens when there is enough activity and demand that someone else is likely to give you an offer in a short period of time – if I’m getting one offer a week, then I’ll generally take an offer that acceptable and move on, and I’m not going to set the asking price lower than I find acceptable.

              As a country, we experienced a few years with sufficient housing boom (or bubble, really) that this level of activity was common in several areas of the country for a few years.

              But seriously, go to anywhere in the country outside a few major cities and ask people how many offers they expect to get when they sell their home. When they get one that meets their criteria, the vast majority of them simply TAKE IT and move on with life.

              That’s the norm for most people, most of the time in this country. Yes, there are a few places where that’s the exception instead of the rule, but those places are exceptional.

              And yes, there were a few years where a lot of places experienced that, but those years were exceptional (in a very bad way, actually – yay, bubble).

              I don’t dispute the concept – it’s actually quite simple and, in a sense, always in effect (Wal-mart raises its prices if it thinks there’s enough demand for something, for instance).

              But if you look at the average time on market for housing, in any long-term kind of way, you’ll see that this is not auction-like behaviour, by and large. Offers largely stand alone, most places, most times.

              1. Austin Middleton says:

                And yes, there were a few years where a lot of places experienced that, but those years were exceptional (in a very bad way, actually ““ yay, bubble).

                The median price of a new home in 1963 was $18,000. In 2010 it was $221,800. When prices rise by 1,220% over 50 years people may under-value their home more often than you think. When they do so enough (1,220%!), you’ll get multiple bidders, even in relatively thin markets.

                1. Mousazz says:

                  ‘Scuse me for necroing a 4 year old thread, BUT:

                  That 1,220% rise in prices seems too ludicrous to be true. I bet the main reason is that Austin here failed to account for inflation. Adjusting for inflation, by today’s prices homes would have jumped from ~$127,000 to $221,800. Conversely, Going by past pricing, the price jumps from $18,000 to ~$31,300. That leaves us somewhere around a 74% in increase of value of real estate.

                  Now, admittedly, I just used the first two google searches (links to one of them didn’t work) for ‘inflation adjuster’, as well as using Austin Middleton’s data provided. It’s also a question what influenced a change in pricing of housing – is it really under-valuing, or is it more a question of growing urbanisation, making city-centre land more attractive? Nonetheless, real estate definitely didn’t become 12(!) times more valuable – more like 1.7 times instead, which is still quite a shot upwards in price.

      2. BenD says:

        This is only true in most US markets. In some US markets and many markets in (for example) Europe, the asking price is the MINIMUM price.

        I would guess that in Shamus’ market, the asking price was (and is) a place from which the buyer and seller would bargain downward, but in some places the opposite is true.

        Either way, since the bank gets the final approval on offers in these scenarios, it’s generally more intelligent for the bank to at least set a range!

        1. Alan says:

          How does that work? Is this just a matter of there being enough demand that sales are auctions in all but name? “I’ll give you the listing price.” “That’s nice, but someone else has offered listing price plus 2%, and I plan to accept tomorrow. Maybe you can do better?”

          Otherwise listing the minimum that you’ll accept seems like a terrible bargaining tactic. Or perhaps this is like eBay’s reserve limits, where the initial listing is understood to be well below reality because it provides the seller with some other benefit?

  33. Amarsir says:

    This is a well-titled post, because whether the problem comes from a bank’s foolish procedures or a bank’s attempt to follow the government’s foolish procedures, it’s bureaucracy either way. It’s a formalized process of doing someone else’s thinking for them. Which simply doesn’t work, before / during / after the housing collapse.

    When I bought my first house back in 2003, I knew exactly what I wanted and how to get it done, and still had to drag the “experts” into position so they could “help” me make the purchase. At that time I decided that if I ever suffer brain damage and still feel entitled to a large salary, the mortgage industry is the place I would go.

    So I’m not at all surprised it’s a problem in 2010, when greed has been replaced by fear and the red tape is thicker than ever. I admire how you handled it, but man does it bother me that these banks are the institutions we collectively decided should NOT fail.

    1. Deoxy says:

      The response to any determination that your company is “Too big to fail” is that the management of the companies tries much harder… to fail.

      The first set of management took a bunch of money and did a bad job, but the government bailed them out… so the next set gets larger salaries/perks/etc and does an even worse job. Lather, rinse, repeat.

      This is why companies need to be allowed to fail. If failure is rewarded more than success (which is what that does for the people at the top), then more failure is what you’ll get!

  34. Otters34 says:

    Mr. Young, this has no bearing on anything to do with the post’s material, but you have a lovely family!

  35. Jarenth says:

    ‘Shawmoze’ is close to ‘Shamoose’, but just not close enough.

    Man, there’s certainly some in-depth and interesting discussions on home ownership and renting here. I wish I could contribute in any meaningful way, but I only recently signed a lease for my second ever rental place, another small studio. Every time I get or read anything related to my rent or to the renting situation in particular, I feel like a kid pretending to play adult house.

  36. ernest says:

    “It's been drifting further and further from comedy and becoming a lighthearted action-adventure. That's not bad or anything, but I didn't know this was something that could happen to an author.”

    Shamus, have you ever taken a look at Charlie’s Diary? It’s Charles Stross’s blog, and he has quite a lot of stories about his experience becoming an SF author, how to avoid basic first-time mistakes, and so forth.

  37. Rich says:

    It’s funny because I’m in a sort of same issue with the bureaucracy of banks but in a different way. The wife and I bought a townhouse in Florida six months ago. We’re pretty much broke now. I’m unemployed and she is still working at her NYC job via computer.

    We want and desperately need to take out a mortgage on a property that we own outright. But we can’t. The house is ours, straight up. We were told that we had to live here for at least six months before we could take out a loan on it. This loan would pay off my student loan and a few credit card bills. Consolidating that would leave us with a single payment that is at least $1500 a month cheaper than what we are paying now.

    This gets us out of a huge hole.

    But it seems that neither of us has a good credit score. Why does this matter? We want to pay off the very bills that make our credit score suck. Yet our credit score won’t allow it? What? Are you serious?

    Catch 22. And it’s like some twisted joke. We just need to get a $35,000 loan on our house. We will then pay off everything. And then pay off the loan. But no. We have collateral that the bank doesn’t want because we owe money. That we want to pay off with our collateral.

    Sometimes I want to suck a gas pipe, but we only have an electric stove.

    1. Deoxy says:

      It might work with a co-signer. After all is said and done, then re-finance to get the co-signer off of it (as a courtesy to the co-signer).

  38. Reed says:


    Your mortgage wasn’t with Bank of America, was it?

    Because… did you SEE the Chris Hayes segment on “All In” a few days ago?

    Check it out:

  39. Zak McKracken says:

    I just came across this and thought it would fit the mood:

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