Ever feel like you’re battling your mortgage lender for your life? Or the life of your home?
The unfairness and irrationality of mortgage servicing makes it easy to see the fight as one for your self worth. Who is comfortable being a victim of incompetent and indifferent institutions toying with your life?
I’m equally indignant.
But let’s stand down, long enough to see if the fight is worth the effort.
When the fight is everything
Three clients in as many months have found themselves unable to walk away from a fight with their legal opponent. Each one has acknowledged, out loud, that they would be better off settling. Or even walking away.
But each one found themselves returning to the fray.
I think they’d watched too much sports on TV about the “agony of defeat.”
They bought into Vince Lombardi’s world view: Winning isn’t everything, it’s the only thing.
That may work for sports. It’s not so simple in the law.
In law, what do you get if you win? My clients seemed to be battling for their view of themselves as winners, not for the stated subject of the fight.
And legal fights seldom result in that kind of vindication.
The house that consumes you
The most recent example is the couple whose loan servicer has undoubtedly botched its job of collecting their payments and applying them correctly.
The fight was several years old when I met them. They admitted that they hadn’t made payments for many years.
The arrears were in the hundreds of thousands of dollars. The house was worth well less than the undisputed arrears.
Even the contractual payments, not to mention the arrears, were well more than they should be paying for housing.
Face to face in my office, they decided to stop the fight about how their payments had been applied, and about how the arrearage was calculated. They’d live in the house for free, while waiting for foreclosure.
That rational decision didn’t seem to last as long as it took to drive home, when the urge to fight about the wrongs of the servicer returned.
Suppose they won? Suppose that all of the accounting errors are resolved in their favor?
They still have a house they can’t afford on today’s income.
Should you keep the house
When you strip out the emotions that come with the word “home”, a house is about housing. A roof over your head. A place to shelter your family.
And housing competes, in a competent personal budget, with lots of other immediate needs, and the great and distant need for money for old age.
Most financial experts say that the cost of housing should be between 31 and 37% of your income. That includes not only payments on the house, but associated insurance, maintenance, and taxes.
Here in Silicon Valley, almost no home prices are consistent with that target. And even long ago purchases with lower acquisition prices have been drained of their appreciation by the lender’s campaign to sell you a home equity loan.
And no amount of emotion about “home” or difficulty in finding other housing strips overspending on a house of its serious, long term consequences.
Winning is only thing
The attitude I’m encountering of seeing winning and losing as the central question isn’t confined to disputes with mortgage lenders.
It permeates other legal disputes, too.
In fact, it’s easier to see the impact of winning versus losing thinking when the stakes don’t involve a home.
There, it’s clearer that what drives the players is self image and the need to come out on top, regardless of the game.
An alternative guru
In matters legal, perhaps we bench Vince Lombardi and the “winning is the only thing” world view.
Let’s look at the cost of the fight, and the utility of winning. What’s lost if you “lose” or walk away.
Sportswriter Grantland Rice saw things differently:
“It’s not whether you win or lose, it’s how you play the game.”
Though law isn’t a game, I want my clients to be willing and able to walk away from the “game”, having played smart, even if they didn’t “win”.
A strategic retreat sometimes works best.
Getting the truth from mortgage servicers
Draft a Chapter 13 plan that succeeds