An Attorney Talks ‘Real Estate Disarray’

By Nancy Colasurdo

Published October 22, 2010


When I walk into attorney Frank Marciano’s second-floor office overlooking a vibrant intersection of Hoboken, N.J., he is on the phone with a potential client.

“It’s hard to tell you the one thing you don’t want to do is your best solution,” says Marciano, his compassionate eyes giving balance to his emphatic, booming voice. “Sell your house.”

Marciano has spent nearly a half-hour listening carefully and offering the same advice to this man who has nowhere to turn. He took out a loan a few years ago on the house he has lived in for over 30 years — once paid for — and cannot meet the steep payments that come with a 12% interest rate. He is a laborer whose income has dipped considerably in this economy and is hoping Marciano can assist him in his quest to refinance, but his troubles are tied to the credit problems he’s developed because of this bind.

“Walk away before this loan eats away at your equity,” Marciano says, heartened by the fact that he has triple the equity he needs to come out respectable. “If you wait, you’re going to be at ground zero and worse off. There are worse things than renting. Your mental health is the most important thing.”

Calls like this — what he refers to as “people in distress” — are the norm for Marciano these days. Often they’re people with first and second mortgages way over the value of the house. Often their credit is ruined because they haven’t paid their mortgage and, in turn, they have trouble getting a rental because of their credit.

“I don’t run an office that I just take people’s money and then deal with their problems,” Marciano says. “It’s just not right. So I try to really spend the time listening to people before. If I can’t help them, I won’t take them. About half the people who call with problems simply do not want to take the hard medicine they have to take, which oftentimes is to simply walk away from the property. Hand it over to the bank or take the result of what a foreclosure would mean on them. Half the people don’t come back. Half the people come back and there’s no foregone conclusion that it’s going to work out the way they want it to work out.”

What Marciano is essentially giving in a lot of those calls, then, is free advice that in some cases is likely a valuable second or third opinion.

“The nature of people in these transactions is the hope for a better day, but there’s no indication at all that this better day is coming any time soon,” Marciano says. “And what happens is that by people not falling on the sword now and getting hit with the hardness now, the amount they owe accumulates until the situation is even worse.”

According to a recent article by Gerri Willis, “The numbers showed 816,000 homes have been seized through the first nine months of the year and banks are on track to seize 1.2 million by the end of 2010. Already more than 2.5 million homes have been lost to foreclosure since the recession started.”

The potential client Marciano was talking to when I entered his office wondered, like many, if he should hang on and maybe the economy would get better. Call it denial. Or maybe something else, the ‘H’ word.

“The whole promise of America is that things are always going to be better,” Marciano said. “Even though I personally support and like Obama, the problem is that the exact message that he sold, which is hope, the reality is that people are starting to not believe in hope. People want hope. They want it, want it, want it. But they’re losing it.

“The power of America is there’s destruction and then there’s rebirth. This is what makes America different from all the countries in Europe. The problem we have now is no one wants to have the destruction and allow the rebirth to occur. The more we wait and try to let it all work out instead of collapse and rebuild, we’re going to be in a stagnant position. There’s a lot more pain on the horizon for middle America.”

Marciano opened his practice in 1983, notes that he has been through the problems in 1988, ’93, and ’97, but has never seen the real-estate market in such disarray. There used to be a rhythm to closings. The real-estate process was somewhat procedural. Closings that used to take a month now take three months. His last three closings generated over 250 emails each; contrast that with maybe 30 per closing in the past.

“A lot of the emails are about the uncertainty, the anxiety the clients have about the back and forth with the bank,” Marciano says. “During the height of the real estate boom, literally I would joke with people that it cost more to buy a sandwich than it did to buy a $500,000 condo because they were giving 103% financing.”

Half of his clients buying new property now are from China and India and a lot of them are paying cash. Rentals are going up. There’s a patchwork of laws — i.e., tenant laws — designed to protect people that end up hurting others and affecting their ability to buy. There are banks forcing potential buyers to re-file every two months all the documents they already filed. Condominium associations have come to play a part in transactions with the bank that have nothing to do with the loan.

“It’s obvious that the banks are just totally overwhelmed,” Marciano says. “It’s frustrating as an attorney because often it’s easy to blame us. No one can believe that the banks can act so unprofessional. The banks have so overreacted to all the problems they caused that they’re making their own problems even worse.”

Marciano is particularly saddened by those who saved their money, sacrificed, bought a house or condo and then find everything they worked for is gone.

“The whole premise of their life is brought into question,” Marciano says. “All the things you were supposed to do end up not giving a good result. What was the use of doing a good thing?

“You can see people getting sick over this, where they have children, wives, husbands. I tell them if they downsize their lifestyle, realize they cannot continue the way they are, and accept that, it’s more important to maintain a sense of balance and maintain mental health than trying to maintain a lifestyle that brings no joy to anyone.”

Like that troubled laborer. One can only hope he heard the message loud and clear.