Foreclosure is a nasty process. The stress on families has been well-documented. So has the turmoil it visits on neighborhoods. And it's expensive for the lender. So who in the world does foreclosure benefit? All of us.
Before you CLICK to get away from this obviously psycho blogger, pull out your credit card statements. Look at the APR of each of those accounts. Now imagine making a mortgage payment with an interest rate like that. Mortgage rates are among the cheapest kind of financing available because they are secured by property. By taking the threat of foreclosure out of the equation you end up with an unsecured loan--just like a credit card. And with that level of risk comes that kind of interest rate.
So, how SHOULD banks lend? How can we balance the needs of homeowners and buyers with investors' requirements for safe transactions? How do we keep mortgage financing affordable and accessible? Your ideas are gladly welcomed HERE.
3 Responses to "Is Foreclosure Necessary?"
Julie, you are right. I believe lenders haven't been working effectively with borrowers who truly have suffered misfortune but could keep their homes. Some of that is probably just because the sheer numbers of loans going sideways is too much for the lenders to handle. And there probably needs to be an attitude adjustment in the industry. The other thing is that lawmakers are too slow to enforce existing law against fraud (both on the lender and borrower end), making it too easy for people to walk away.
As Dawn indicated, even those with good credit may decide to walk away if the home value drops. It's funny -- if the house value goes up the bank doesn't hit the owner up for a share of the profits -- yet, some homeowners think the lender should take on their losses if the home's value goes down. The sooner that behavior gets shut down the better for all of us.
Tighter lending standards may help to strike a balance between investors and buyers. Of course you never know what people will do when the market drops as it has now whether they have excellent credit or not.
Good point, there is no way I could afford 13% interest on a mortgage. I guess it is one of those "necessary evils", but I think we should look at the factors involved with the particular home at risk of foreclosure.
The banks should work with those who have become ill and unable to work or those who are facing unemployment, but are willing to put in some effort to save their homes. This would help the banks because if they work with these people they'll get their money. It helps the homeowner in a couple ways; one, saving their home of course and two, preventing them from becoming prey to some of these foreclosure "help" scams. Plus the neighbors' home values won't be hit by living next to a foreclosure house. It's a win-win situation.
As far as the other homeowners who choose to drop their house because they can buy the same one down the street for half the price, nail them. They are nothing but scammers and I don't think we should help them just because they paid more than they would have if they bought in the current market.