
A recent speech by Fed. Chairman Ben Bernanke directed bankers to be proactive in their search for solutions to help consumers save their homes from foreclosure...even if it means a reduction of principal and taking a loss. While we all agree that something has to be done to slow the sharply increasing starts of foreclosures in America, asking banks to foot the entire bill doesn’t seem like a feasible solution in and of itself.
Reduction of “principal” for homeowners so they may sell their homes at a lower price than what they owe is precisely what will cause home prices to continue to fall and our neighborhoods to continue to fragment. The largest reason why foreclosures are up so drastically nationwide is due to a real estate market which has heavily depended on at worst, a slow and steady appreciation in prices.
Since 2005, many parts of the country have seen just the opposite and are at double digit market depreciation of housing prices. For that reason, I think allowing more people to discount their homes so they can “escape” their mortgage would exacerbate things further. We would see a larger inventory supply of homes and with less demand due to the tightening of underwriting guidelines for mortgages.
Part of the solution needs to come from lenders finding creative ways to keep their customers in their homes thus maintaining more stability in our nation’s neighborhoods. Maybe it means they have to modify some of the notes on their books by allowing those people with ARM’s, Subprime, or even A-paper loans who are in trouble to restructure their mortgages in order to stay put. Part of the qualification for doing so could be some form of lender paid “consumer counseling” classes requiring completion.
This solution is going to have to be a collaborative effort on the parts of all parties involved and can’t be the result of the banks just giving in. What are your thoughts on these recent comments by Chairman Brenanke and what do you think can be done to deal with these issues.
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7 Comments
Anyway, even we have someone to blame, it'll not change anything.
it's not time to blame anybody, it's time to restructure ourself, try to renegotiate the deal, find extra income, and life must goes on. even
People forgot the lessons of the Great Depression within two generations and thus, we are (many so over) due for another reminder. Sadly though, this time around we have a much larger, more foreign and subsequently less cohesive population in addition to an enemy that has pretty much supplanted our industrial capacity to fight a war out of this one.
BTW, I love the term 'forgiveness.' That would almost be funny except that it is supposed to be taken seriously as if we were all so blind or stupid.
Unscrupulous lending being the primary driver behind the foreclosure mess.
http://SDI.Financial.officelive.com
The Fed. Reserve should of maintained more strict guildlines to the lending banks. The housing industry was way to slow in offering to help re-structure fair deals to consumers. Over-priced the value by simply adjusting the loan rates and lock them in with the lenders. The Fed Reserve, in our view, was way to late to adjust and lock in fair rates to the lenders to help curb the forclosures. To oversee the problem and to correct the problem by making very simple adjustments. They all saw it comming and done nothing.
CJ in Texas