Foreclosure Relief for the Homeowner or was it Really Just for the Bankers?
The recent announcement by Citi and JP Morgan Chase to Stop Foreclosures for a period of time across their distressed loan portfolios was highly publicized. The perception that was derived from the news reports offered hope that the lenders were going to come together and provide affordable solutions for distressed homeowners. We can all agree it sounded like good news and a very constructive measure toward a resolution of our housing crisis.
The real question you have to ask yourself is did the bankers do it for their own self interest or simply because they really want to help the homeowners.
Let’s go over some simple facts so we don’t get caught up in the false hope of lower loan payments for all. This is not a permanent moratorium on foreclosures. A foreclosure proceeding is the lenders legal right to regain control over a property once it has become delinquent. The lenders want their money back at some point. If they cannot work out a solution they will eventually have to revert back to foreclosure. The current announcements are directed at stopping foreclosures so it can be determined what borrowers should be helped with modified terms to keep them in their homes. Keep in mind, there is no guarantee that the lenders will come up with long term solutions to keep the distressed homeowners in their homes. Also keep in mind that many of you are not going to be eligible because you don’t meet the real definition of a distressed homeowner.
Here is my view. There are so many properties in real estate owned (REO) portfolios on the banks’ balance sheets that it would only be prudent to temporarily stop foreclosures. After all, a basic supply and demand analysis dictates that by adding more properties by foreclosure to the current portfolios will only further depress existing property values and make matters worse for the lenders themselves. The bankers and lenders alike need to slow the foreclosure process down to allow for the current REO inventory to be sold at reasonable prices. Otherwise allowing the rate of foreclosures to accelerate will only add to the severity of the problem. Also, it is not the intention of lenders to take down complete communities with foreclosures. They need natural attrition and balance or they will inflict additional unnecessary losses to their portfolios.
The fact is the majority of loan modifications and government programs, with all the rhetoric, have had low adoption rates and not worked for the people as forecasted. It is hard to wave a wand and change the past given the sheer size of the housing crisis. Stopping foreclosures a solid year plus into the full brunt of the housing crisis clearly is not the prime spot for the lenders to all of the sudden become kind to the distressed homeowners. The bankers and lenders are taking this action to save their own hides. Plain and simple, this is how it works. According to the lenders, there is a financial incentive to put on the breaks regarding foreclosures so let’s make it a positive PR campaign while we are at it. It makes perfect sense.
If you have any doubt, then ask yourself why the lenders have not fully adopted all the government programs to benefit the homeowners. Also, why do loan modifications represent an approximate 90% failure rate? The lenders are owned the money and without a financial incentive to force their hand, frankly, you lose.
Where is the positive for you? The lenders are giving you more time to provide them a solution. A real estate short sale is ideal in this environment. Provide your lender a comprehensive solution. Get your property sold and provide your lender a solution that they cannot pass up. Don’t expect your lender to grant you an affordable solution to your current predicament. Their attitude is that you borrowed the money and you owe it back to them. Remember the old saying “beggars can’t be choosey”. They are absolutely 100% correct and at their discretion they can legally pursue you for their money by means of the mortgage note.
A solution is a hand. Stop and avoid foreclosure all together with Real Estate Short Sales. Even if you just made a bad decision or just got caught and don’t have a real affordability problem, the macro environment in housing is giving you a pass. As an ex-lender, I am urging you to educate yourself and take advantage of your best options. Our site has it all at www.thenegotiatedsolution.com . The sooner you focus on a solution the sooner you will benefit. I am blogging from the front line of the housing crisis.
GHunter
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May 7th, 2010 at 1:14 pm
Many old hands already know that, but this conspiracy also affects things for certain
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Because of so many foreclosures I worry about the market. There exists a possibility it could go soft.
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