Do these people have a clue?
Are they trying to destroy the market?
Is there nothing that the government thinks that they can not fix?
(No, this is not an old Batman sitcom introduction, I am being dead serious.)
The Obama administration is looking to stop all foreclosures until they go through a review by the Home Affordable Modification Program. That is right, he is willing to destroy the mortgage market to protect a few and employee thousands of bureaucrats.
Guys, government is not always the answer. The markets need to find a footing, not be forever beholden to some faceless bureaucrat. I am dead serious here.
There is a cost everytime the government gets involved. If the housing market does not know the rules it can not correct. It will be stuck until investors and homebuyers have some confidence. All velocity will cease, as we see now with the lowest new home sales in 50 years this January.
Foreclosures are part of the fix. Sure it is a painful fix, but it is a necessary one. The markets need a foundation.
Our present governmental officials think they are the foundation.
They are sadly mistaken.
The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.
“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”
She confirmed the authenticity of the document, which hasn’t been made public. via Bloomberg.com.
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If we could include a check-up and full body scan with it too then it would make sense. Not fair to foreclose on a sick person. Georgias lenders would likely have to raise interest rate a full point to offset the added risk and expense. Not a good recovery plan.
I dont want a government review of all foreclosures. However, the govt is on the hook for about 60% of notes guarateed by agencies and the 20% of mortgage debt owned by banks. So the govt and the taxpayer have a huge interest in this process. The losses should be less if the loans are property modified, if the banks would cooperate on short sales, or simply organize their process. The average loss on a foreclosure is about 50% of the loan amount. Foreclosing on 10% of homes in US is not the best answer.
At the same time, we have a number of banks and serviciers who are resisting doing loan mods. They lose papers, they lie to homeowners, don’t answer calls, and use uninformed low level employee to deal with homeowners. The banks as a bureaucratic as the government. And, they may be worse.
If the servicers were doing a decent job of analyizing loan mods, there would be no reason for such a threat.
I don’t agree with the government involving itselft from the beginning. Especially with the huge bailout sums for the banks, who got us in this mess to begin with. Then they got bailed out. Any small business owner, who would not run his business well and failed, no one would rush to his rescue, because he’s too small? They should have let the banks fail. It would have been a lot worse than it is now, but there would be no government interference. I believe in the free market. But do we really have it anymore? I thought it was about good ones succeeding and bad ones failing. These big guys are now rewarding themselves with millions of dollars in bonuses while regular people are being evicted from their homes? Who cares about them? I wonder if they would still have those millions to give themselved in bonuses if there was no bail? I guess, we’ll never find out. Now, they call a reduction of rate or adding years to already a 30 year mortgage a modification?
Can you imagine the cost in tax payer dollars to pay people to do these reviews? Bureaucratic insanity disguised as ‘help’.
I am amazed at how every time they try to fix the economy, or stimulate the economy, they just make things worse. When will they ever learn to just leave things alone and let things work themselves up. You’d think their be some sort of real estate person involved in these decisions.
Just a few short posts ago, you had this to say about the lenders:
“The banks have been negligent in managing the foreclosure and short sale processes in the past few years.”
The result? The guy in that story bulldozed his home. The fact remains that the banks have an opportunity to make some money back on their loans, but they refuse to adjust the mortgage or compromise. The result? Record foreclosures. Preventable foreclosures.
Now, the government is stepping in not because they want to force banks to do the right thing, but because banks continually REFUSE to do the right thing. Are the homeowners to blame? For sure. Are the banks to blame? Yup. No one is saying, “let me live in this home for free”; they’re saying, “let me pay you what I can.”
The lenders took on the risk as much as the homeowners. But since it may be a bit more work to renegotiate a lot of defaulted mortgages, they’d rather just kick the people out. The banks lose (they have a house that is still not able to be sold for what is owed) and the homeowners lose (they end up living in their Hondas). So why not compromise?
If the only reason you’re in business is to make money, you may want to reconsider being in business. Businesses need to make money for sure, but that shouldn’t be the ONLY reason anyone does anything. The banks being stubborn is only worsening the economy by forcing people out of their homes. Last I checked, the taxpayers lent them money interest-free. It’s now time to lend some of that grace back.
If you want government out of the market, be a better market.
My $.02
Dear Big Government,
If a borrower decides for whatever reason not to pay off his debt, it is NONE of your business if the lender decides to exercise its contractual right to seize the collateral in an attempt to minimize its losses.
Sincerely,
A Real American
Maybe for some, if the banks would work with the borrowers on the amount of cushion in escrow would be enough to keep it out of forclosure. Being forclosed on for not making the increased (escrow)payment amount. So to allow a person not to go into forclosurer if they can continue to make payments without these larger “cushions” may help some.
If the escrow is to fall below $0, Charge the loan interest to the negative balance and add it to the end of the loan balance. If at some point the person is able to pay that interest amount off, let them. If they are able at some point to add more to their escrow and the borrower wants to KEEP a surplus in the escrow for unexpected changes, let them. Of coures the surplus could not be more than say half of what the total for year due would be.
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