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foreclosure: Strategic Default, Principal Forgiveness and the Specter of Moral Hazards - 11/13/11 04:01 PM
 
As we wind up year four of the worst housing crisis since the Great Depression, the country still faces the issues of strategic default, principal forgiveness and the specter of moral hazards. It now seems obvious that waiting for an illusive housing recovery is an exercise in futility, for we’re no closer to stability than we were at the beginning of the recession. However, we’ve also seen that ill-conceived government actions do little more than waste precious tax dollars, while in some cases worsening the crisis. What’s a homeowner to do? 
 
Since the beginning of the housing collapse, … (36 comments)

foreclosure: Government Can Create Modification Programs That Work - 04/26/11 05:06 PM
While HAMP, the administration’s foreclosure prevention program, has been a dismal failure, efforts in Pennsylvania demonstrate that government can create modification programs that work.  And while the Pennsylvania program is dramatically more effective, it’s also much less costly to taxpayers and less of a hassle for lenders to administer. 
 
What the Pennsylvania program demonstrates is that such programs don’t have to be complicated—in fact, the more complex such programs are, the less likely they are to achieve success.  Yes, government can create modification programs that work; they just have to think more creatively and less bureaucratically. 
 
The … (10 comments)

foreclosure: 2011 May Be the Year of the Short Sale - 01/06/11 05:22 PM
 
With new rules from Treasury and pressure from investors, 2011 may be the year of the short sale.  And while the Home Affordable Foreclosure Alternative, HAFA, was intended to speed up the short sale process, real estate agents and sellers know the program has been anything but speedy. 
 
With millions of homeowners in serious default, many had expected to see short sales increase dramatically in 2010 as HAFA encouraged lenders to increase the pace, but the program lacked sufficient incentives for servicers and ended the year with less than 700 approvals.  However, a report on CNBC describes how … (9 comments)

foreclosure: Paying on an Underwater Mortgage May Create More Problems than it Solves - 11/01/10 09:01 AM
An interesting article in today’s LA Times describes how paying on an underwater mortgage may create more problems than it solves. And while we often speak of the moral hazard of “strategic default,” there are also hazards to staying and paying.
 
If we honestly analyze the consequences, we may realize that ignoring the problem of negative equity harms all of us and only hampers our chances at recovery. In another POST I describe a possible solution and why negative equity must be addressed.
 
The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s … (5 comments)

foreclosure: Surprised That The Rental Market Is Improving? I’m Not. - 08/10/10 09:56 PM
An article on MarketWatch, "Apartment Market Shows Signs of Improvement," seems to indicate some confusion on the part of the writer who can’t seem to grasp the reasons behind the recent increase in the number of renters, ". . . with the job market still struggling, it isn't easy to explain the growing demand." And some apartment owners, following reports of a significant increase in demand over last year seem equally baffled. According to one, “it’s hard to fully explain where the demand is coming from.”
 
Some in the apartment industry seem to be "hypothesizing," inferring that the appearance … (76 comments)

foreclosure: HAMP Has Seen New Trial Modifications Drop 90 percent Since September - 07/20/10 08:55 PM
The Home Affordable Modification Program, HAMP, has seen new trial modifications drop 90 percent since September, an indication that the beleaguered foreclosure rescue program is reaching the limits of its usefulness. Often criticized for not saving the promised millions from foreclosure, HAMP’s latest report indicates significant declines in the number of new homeowners accepted into the program and a dramatic increase in the number of trial modifications that have been rejected.
 
In reality, it’s always been impossible for the administration to keep 7 to 9 million families from losing their homes; and the emotions and finances of millions of homeowners … (18 comments)

foreclosure: Forget Modification And Move Ahead With Foreclosure - 06/28/10 08:39 AM
Since its inception, the Home Affordable Modification Program has been criticized as too little, too late; and the criticisms have come from all sides of the political spectrum. Put simply, HAMP doesn’t work, never could have, and should be abandoned. It’s time to forget modification and move ahead with foreclosure. Foreclosures will happen anyway; only the pain will be extended over a much longer period, like the current oil slick threatening the entire Gulf coast. Unless we can create a magical formula that will provide jobs and restore the assets of struggling homeowners, avoiding millions more foreclosures and a double dip … (16 comments)

foreclosure: HAMP Encourages Making A Graceful Exit - 06/26/10 12:46 PM
In a video entitled, Your Graceful Exit, the government is taking steps to encourage struggling homeowners to take action.  I suspect they are motivated by the sheer numbers of delinquent mortgages and are aware that the economy will not recover until the housing market is stabilized.
Unfortunately for homeowners, producing a video is far less effective than actually taking steps to "save" 7 to 9 million homes from foreclosure.  With HAMP considered a dismal failure by most, and with no relief on the horizon, struggling homeowners should just grab some popcorn and be content that their government has taken time … (2 comments)

foreclosure: Banks Pursuing Deficiency Judgments May Have Something To Fear - 06/16/10 10:21 PM
An article in the Washington Post describes how banks pursuing deficiency judgments may have something to fear. According to the article, some lenders are taking a more aggressive stance in dealing with distress sales that recoup significantly less than the original loan amount.
 
In the past, the cost/reward ratio caused few lenders to seek deficiency judgments, but the practice has become more widespread as lenders incur greater looses due to increasing numbers of foreclosures and short sales. According to the MBA, banks are not pursuing those who lack the ability to repay; and lenders participating in the government’s HAFA program … (53 comments)

foreclosure: New Fannie Mae Policy May Offer Hope To Struggling Homeowners - 05/03/10 09:49 PM
In an attempt to help both the housing crisis and the economic recovery, a new Fannie Mae policy may offer hope to struggling homeowners. Those who are currently unable to make their monthly payments can offer a “deed-in-lieu” of foreclosure or “short sale” of their property and may be able to qualify for a home loan much sooner than allowed under previous underwriting guidelines.
 
In an announcement released earlier this month, Fannie Mae described the new rules which will take effect on July 1 and will allow many to return to homeownership within two years. Although the changes are significant, … (7 comments)

foreclosure: How Declining Home Prices Impact All Of Us - 02/10/10 04:49 PM
As Treasury copes with mounting foreclosures and the ineffectiveness of its modifications programs, many attempt to ignore how declining home prices impact all of us. Some assume or hope the problem will “self cure” over time. It won’t.
 
The current foreclosure crisis demands our attention; to ignore it is to deny the potential impact that millions of foreclosures would have upon both the housing market and the overall economy. While it’s impossible to know the precise number, some experts have predicted that we’ll suffer more than 15 million foreclosures over the next five years; and only half that number would … (47 comments)

foreclosure: Punishing Foreclosure Victims Only Continues The Pain For All Of Us - 01/17/10 08:08 PM
While news stories, articles, and blogs continue to be written about “Strategic Default” and how those facing foreclosure shouldn’t be allowed to walk away or have their mortgage balance reduced, punishing foreclosure victims only continues the pain for all of us. The problem we face isn’t one of a few hundred or even a few thousand who carelessly spent beyond their means; this issue touches tens of millions of U. S. homeowners, the majority of whom acted responsibly, and with the knowledge available to them at the time. Most thought they were making wise choices.
 
How can we blame the … (262 comments)

foreclosure: Will Housing Experience A Lost Decade? - 01/14/10 05:27 PM
There’s been lots of discussion about the crisis in the Japanese economy and how it continues to struggle after ten years of no improvement, and many wonder if the U.S. may experience a similar fate; but the real question for American consumers is: Will housing experience a lost decade? While the answer is somewhat dependent upon geography, there are lots of reasons to believe the answer may be yes.
 
It has been estimated that homeowners have lost about $12 trillion in net worth—much of the loss resulting from declining home prices. That loss translates to difficulty for sellers, making it … (92 comments)

foreclosure: Has Housing Reached A Turning Point Or A Point Of No Return? - 01/11/10 03:40 PM
While the pundits and politicians discuss the housing crisis and the various ways to effect a recovery, the question to consider is: Has housing reached a turning point or a point of no return? It appears that housing is unlikely to return to its most recent glory days. But that’s not necessarily a negative interpretation; it just means that the housing market of the future will look dramatically different from that of the past decade.
 

We now know that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though … (174 comments)

foreclosure: Perhaps It’s Time To Re-think “Strategic Default” - 12/17/09 12:33 PM
Taking a cue from struggling homeowners, Morgan Stanley, the giant Wall Street securities firm, is planning to transfer 5 properties it owns in San Francisco to its lender, Barclays Capital. The move, in effect a strategic default, will terminate the firm’s obligation on a loan of $2 billion.
 
Although Morgan Stanley paid $6.5 billion for the office buildings in 2007, property values have declined as much as 50%. And while the company is current on its debt and has the funds to maintain payments, the move represents a purely financial decision.
 
It seems that strategic default may be the … (22 comments)

foreclosure: Foreclosure Victims Have No Hope And Their Only Change Is Their Address - 12/03/09 09:23 AM
When the current administration came into power it promised “Hope and Change,” and struggling homeowners, devastated by the rising unemployment and the collapse of the housing market, eagerly awaited the changes that would save them from foreclosure. The previous administration’s Hope for Homeowners had proved more hopeless than hopeful, and the promised relief had never materialized.
 
But January had ushered in a new attitude, and new team that would look out for Main Street, not Wall Street; and hopes ran high. February’s announcement that 7 – 9 million homeowners would be saved from foreclosure let struggling homeowners know that help … (18 comments)

foreclosure: Loan Modifications Are Not Working And The Government Doesn’t Get It - 11/30/09 03:08 PM
The Treasury Department has announced yet another effort in its attempt to modify the mortgages of those facing foreclosure. Hoping to convert many of the trial modifications to permanent status, the Government plans to apply pressure to lenders that have been slow to respond. Requiring lenders to report the status of their modification efforts, the Treasury Department intends to make public those lenders who fail to show progress.
 
Wow! This is big news. Now the government is going to point out the “bad guys,” as if we didn’t already know. If that’s the teeth in this “new” incentive, those expecting … (15 comments)

foreclosure: Option Arms, The First Volley Has Exploded - 09/18/09 02:48 PM
Last week I wrote a blog post, Millions More Foreclosures Coming, in which I reported that Assistant Secretary for Financial Institutions, Michael Barr had predicted the inability of the government to stop millions of homeowners from losing their homes. Foreclosures, he said, would continue at historic rates, a prospect that would affect the housing market for years to come.
 
Now, according to a report on Reuters, we learn that officials are preparing for this next wave, a tsunami of cataclysmic proportions; and there appears to be no way of stopping it. Following a meeting with administration officials on Thursday, Iowa … (22 comments)

foreclosure: Millions More Foreclosures Coming - 09/11/09 07:57 PM
If the economy is improving, do we really have millions more foreclosures coming? According to the U.S. Treasury, the answer is yes. In written testimony to Congress, Assistant Secretary for Financial Institutions, Michael Barr said that, regardless of the success of mortgage modification efforts, we should still expect millions more foreclosures.
 
Mr. Barr’s testimony is certainly not welcome news for those anticipating a significant recovery in the housing market. In fact, it is an indication that significant recovery is still years away.
 
And there are other factors that confirm the fragile state of both the economy and the housing … (178 comments)

foreclosure: The Housing Bottom We've Reached Is Quicksand - 08/31/09 06:56 AM
Recession over? Recovery on the way? Housing on its way back up? Don’t prepare for the boom just yet. While the talking heads—they’re called that for a reason—are focusing upon a few bits of positive economic news, the economy still continues its slump.
 
I think it’s important that we be aware of our economic reality rather than to ignore the facts, focusing upon “rosy” news reports and wishful scenarios that may never come to pass. Awareness of the reality is fundamental to making rational and prudent business decisions. I want the facts, and will create my goals based upon what … (10 comments)

 

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