Statistics show a 25% increase this year in foreclosures, from September 2007 to September 2008. Foreclosures are at an epidemic level we have never seen before. The bailout was supposed to help, wasn't it?
Well, yes it was. But keep in mind, it happened in October and will take some time to have an effect. In addition, it was never intended to stop foreclosures, but to prop up the credit market overall so that money can continue to flow. At best, it stops the slide in prices that occurs when buyers cannot get loans to buy. Its aim was the overall economy, not the individual.
The original bailout idea was for the government to buy "troubled assets" meaning those mortgages that were in default and near foreclosure. The thinking was that it would provide funds to the banks to loan again, and provide some cover for those facing foreclosure so they don't lose their house immediately. Renegotiation of the loan might be possible, allowing the homeowner to afford to keep paying on their home.
But all that has changed. The government has decided instead to invest in stocks of the banks. It provides them with the same cash to operate, but they keep the bad loans. And many banks, instead of using the money to make loans, are using it to purchase other banks.
So where does the homeowner stand in all this? On the sidelines. Essentially, for you, nothing has changed.
The FDIC, however, actually has proposed an idea aimed directly at you. They want to create a 300 billion dollar program to renegotiate loans.
Also Wednesday, Housing and Urban Development Secretary Steve Preston said the government may let more borrowers qualify for a $300 billion program designed to let troubled homeowners swap risky loans for more affordable ones. The program was launched Oct. 1, but there are concerns that lenders won't participate because they have to voluntarily reduce the value of a loan and take a loss.
Unfortunately, the treasury secretary is adamantly opposed to this, and the President has already expressed his opposition to it. So there is no relief in sight right now for the homeowner in trouble.
This means that Short Sales are just as needed, or more so, than they were before. Call me and let me see how I can help you get out of financial trouble, and preserve your chance at a financial future. And comment here with your opinions of the bailout, the economic crisis, and the government's response. We'd love to hear from you.
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