A number of real estate and mortgage experts stipulate recently that a second housing crisis might be coming with a wave of foreclosures based on federal loan modification policy failure. The results of Home Affordable Modification Program are not impressive only about 30,000 out of 3.3 million eligible modifications became permanent. The banks are very reluctant to make trial modification permanent and drag their feet. The Bank of America, one of the largest HAMP participants made only 98 mortgages permanent this year.
With properties terribly upside down many people might decide to just walk away because they cannot afford even modified mortgages or understand that even after their mortgage is paid for in the future they have paid way more than their house is going to sell for.
The banks are in a precarious situation as well even if loan modification policy succeeds. It's very simple - would there be any serious lending if the banks have thousands of modified mortgages at 2% interest rate for 40 years? On the other hand a new wave of foreclosures will definitely wipe more banks out.
So here we go again. There is a simple truth with the whole scenario - outsourcing industrial wealth in exchange of speculatory wealth is never a good idea.
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