The Foreclose Crisis

One would begin to wonder if and when we will ever get out of this mess. While there was a lot of statistics and good information the truth for me seems quite a bit different.

First of all we all know how unique each real estate market can be. The second thing the article forgets to factor in to the 20% figure, are homes that are either paid for or not even close to being underwater. This would take the actual percentage of foreclosed homes in relation to all homes, dramatically lower.

I do agree that lending guidelines need to be looked at to accommodate more buyers who have fallen victim to either their own stupidity or market forces beyond their control. If not there is going to be a shortage of homes for these people to lease for the next 3-5 years, until their credit rating gets back to a point that they can re-qualify. 

I am not sure that wholesale principle reductions is the answer. Lower interest rates if a borrower stays in their home for any length of time would have the same result. If banks had the notion and ability to be more creative with reworking loans, more people would just stay in their homes. Let's face it, underwater or not, its still their home and they need a place to live. If borrowers could be "re-qualified" for their mortgages and those who can afford it were given an incentive to hold on like a low interest rate until they get back to an equity position, then most of the ones that could afford the payments would probably keep their homes.

Those that no longer qualify should be given the immediate green light to short sale and not be penalized on their credit rating so they cannot buy another home. Why should a borrower who tries to do the right thing wether they remain current up to the sale date or not, be penalized because the market is so far down or their income has been reduced? I think if the next home they try to buy is well within their means, they should be given a loan. This would help solve some but not all of the problem and prices would start to stabilize as the demand for homes increases with more "qualifiable" buyers remaining in the pool. Even though banks, who facilitated this problem to begin with would take a potential bigger hit initially, as prices rebound their losses would be diminished.

Just a thought....

I don't see banks offering or the federal government mandating, writing down mortgages for those underwater.