Have We Saved The Big Ships While Letting The Passengers Go Down in Their Lifeboats?
In response to an MSNBC.COM article - Banks repossessed 1 million homes last year - and 2011 will be worse - I posted the following response:
We've been very lucky in Anne Arundel County, Maryland. While other parts of the country have experienced high foreclosure rates, our local real estate market - despite nearly a 30% decline in value from the market peak in 2006-2007 - has not seen significant foreclosure actions. Less than 10% of our current active inventory are foreclosures. About 1 in 12 homes are flagged as a foreclosure in our real estate market and are often great deals and sometimes really are steals!!!
The real challenge as I see it, is finding a way to incentivze banks to work with homeowners before they become distressed, i.e., past due on their mortgage payments. Banks don't appear to be willing to work with homeowners who may need to sell short until they are in default, once in default then they're on the foreclosure track. It's a "chicken and egg" problem. If more banks were willing to cooperate with borrowers before defaulting on their mortgage, we just might be able to avoid more foreclosures.
To really get things back on track, we need a true spirit of cooperation between banks and borrowers. Ben Bernanke said in an interview on television the other day that one of the root causes of the last depression was the Feds allowed the banks to fail. Fifty years from now when we look back, will the real cause of the Great Recession be that we let so many homeowners fall into foreclosure? Will we have saved the the big ships while letting the passengers go down in their lifeboats?
In case you missed Mr. Bernanke's interview on 60 Minutes, watch below: