Two items from the REALTOR® Magazine Online Daily Brief:

A masked gunman held up an Athens, Ga., bank on Thursday, saying that he was only getting his money back after the lender had foreclosed on his home.

The man entered Regions Bank wearing a black ski mask and pointed a handgun at a teller and said, “You took my house, now I’m going to take your money,” according to Athens-Clarke police.

The man fled carrying the money in a bag. The bank plans to review foreclosure records to try to identify the man.

Source: Athens Banner-Herald, Joe Johnson (02/21/08)

And then:

A federal judge in Wilmington, Del., where many of the country’s largest companies are incorporated, says he is considering reining in mortgage companies that have been foreclosing on consumers who have brought their home loan payments up to date while they are in bankruptcy.

This week, several big mortgage lenders, including Countrywide Financial Corp. and Wells Fargo & Co., told Judge Brendan Shannon of the U.S. Bankruptcy Court that he didn’t have the power to decide whether late fees and other costs imposed by mortgage companies on bankrupt home owners are appropriate.

An attorney for several mortgage lenders, including Countrywide and Wells Fargo, said Congress recognized a “clear bright line” in the bankruptcy law, one that keeps judges from interfering with mortgage companies.

Shannon dismissed that argument saying that if it were true, he would be on a “complete fool’s errand.”

Shannon said the “surprise” charges make problems for the bankruptcy system, because home owners who have just emerged from bankruptcy can be forced back into bankruptcy to fend off foreclosure attempts.

Source: Dow Jones Newswires, Peg Brickley (02/21/08)

Why am I connecting these two stories?

Primarily because they are both related to real estate and stupid moves on the part of the subjects. In the first story, the line “You took my house, now I’m going to take your money,” ignores a very basic fact.

The bank didn’t take HIS house. They took back their house. He wasn’t paying for it. Why should they let him stay there? He made a promise to pay for the house they bought for him. And, he didn’t live up to his end of the deal. So, not only is that bank probably losing money trying to get paid back, but he adds insult to the injury by stealing some more.

And remember, this is GA. We didn’t have the value collapse that CA and some other markets have had. The interest rates have stabilized.

Of course, until this guy is caught, we won’t know the whole situation… but he sure isn’t Robin Hood.

And then there are banks acting stupid. I just don’t get it. Right now, while the banks are looking at a flood of foreclosures, and literally being run out of business under the pressure, if someone wants to get current and keep the house, the bank should be THRILLED. There are websites telling people to just walk away. And people are doing it in droves. But here are people that are trying to make good on their promises. And the banks are looking to stick it to them some more. It is flat out dumb business.

Two options:

  1. As a borrower emerges from bankruptcy, trying to keep their house and catching up on payments, the bank can slam them with extra fees and perhaps get a little revenue… or drive them back into bankruptcy… where they lose the house.
  2. As a borrower emerges from bankruptcy, trying to keep their house and catching up on payments, the bank can waive the extra fees and offer free classes in financial management.

Under the first option, the bank gets a non-performing asset (we would call that a liability now) and the lifelong anger of the borrower, their friends and relatives. Maybe even the public will start to catch wind of this… and there could be a public backlash.

Under the second option, the bank gets a consumer that is better educated, and understands that they got a helping hand and gift. They don’t have to take on the foreclosure process and instead of anger, they get admiration for being responsible. If the public gets wind of this, they could get a positive viral message from it.

Mark my words. There will be a maverick bank that will stop looking at chiseled in stone rules, and starts looking at ways to fairly deal with these people… while helping their own bottom line. They will emerge as a stronger institution with much more community goodwill.

I am a free market advocate. So, I think that strategy like this needs to come from the business, not from the government. And it only makes sense.