Basic Misunderstandings about the Benefits of Foreclosure--As my former mentor used to say " I am shocked, chagrined and dismayed" at the lack of true understanding of the process.

Great post!  I agree that we have to look at the issue from all sides but I think the biggest point to folks who say let Capitalism play out is exactly the fact that in the end it often costs the banks more time & money than some of the other options.  I personally made an offer on a short sale years ago and after I did my inspection and was all set to close the bank foreclosed.  I called the bank and all they would say is you'll have to wait until we list it as an REO.  I tried to explain that I am ready to purchase the place as is today, but the answer was no we have to go through our beurocratic process.  6 months later after I had found another home for my family I see the home pop back up on the market.  They sold it for $15k less than I was willing to pay and that doesn't include all the man hours they paid over the 6 months and doesn't take into account how the former owners would have also benefitted from the short sale.  This is bad for everyone & not a good financial decision by the bank.  Lose-Lose for everyone.

The problem with today's market is all about GREED.  Everyone has a share in this debacle.  The Banster;s should have known better, but saw big profits on home loans.  The homeowner that took out big ELOC loans not considering the future of home prices(where did that money go?).  Everyone wanting a home NOW, at any price and now that it is upside down wanting to bail out like it was a broken toy.  The FLIPPERS that bought and sold in 60 days for big profits till the last one standing went under. The crazy rise in home prices was fueled by everyone, so there is lots of blame to go around.  Yes the Banksters are mostly insured, but still will have losses in money, time, legal costs and stock prices.  The unfortunate victims are the homeowners that got caught up in the zeal and now stand to lose credit and money in this.  The other big loser is John Q.  that is being asked to bail out this problem.  So here we are with a huge mess that will take another few years to sort out and a lot of lost money and displaced people.  There is enough blame to go around and we can only hope there is a big life lesson in here somewhere.

Because we speak in non personal terms such as "THE BANKS" it makes it difficult to pin the blame on an individual or appeal to their conscience. As long as the decision makers are able to hide behind corporations  and middle management types, nothing will ever change. People in power  at the banks are able to make the cold hearted decisions that seem to negatively impact everyone, even the banks themselves, because they know they will never be held personally accountable. So they can sleep at night, feeling that what they are doing is in the best interests of their "shareholders" when the decisions made are usually based on expediency and efficiency(another words, whatever is easiest), not necessarily long term profits. Keep in mind, bonuses are usually based on quarterly and annual performances, not what will help all parties in the long run.

Because we speak in non personal terms such as "THE BANKS" it makes it difficult to pin the blame on an individual or appeal to their conscience. As long as the decision makers are able to hide behind corporations  and middle management types, nothing will ever change. People in power  at the banks are able to make the cold hearted decisions that seem to negatively impact everyone, even the banks themselves, because they know they will never be held personally accountable. So they can sleep at night, feeling that what they are doing is in the best interests of their "shareholders" when the decisions made are usually based on expediency and efficiency(another words, whatever is easiest), not necessarily long term profits. Keep in mind, bonuses are usually based on quarterly and annual performances, not what will help all parties in the long run.

Because we speak in non personal terms such as "THE BANKS" it makes it difficult to pin the blame on an individual or appeal to their conscience. As long as the decision makers are able to hide behind corporations  and middle management types, nothing will ever change. People in power  at the banks are able to make the cold hearted decisions that seem to negatively impact everyone, even the banks themselves, because they know they will never be held personally accountable. So they can sleep at night, feeling that what they are doing is in the best interests of their "shareholders" when the decisions made are usually based on expediency and efficiency(another words, whatever is easiest), not necessarily long term profits. Keep in mind, bonuses are usually based on quarterly and annual performances, not what will help all parties in the long run.

It is all about the rich getting richer and by that I mean the wealthiest/corporations have no issue with ethics or morals because it's about the money and mainstreet is a machine to them; sewing the golden threads into their parachutes and hand towels.  It will be interesting to see where we're at in 5, 10 years from now. 

Great commentary, Elliot. As to the "hard-boiled Capitalists who tell me comment after comment, how this is a society based on free choice and financial accountability", I think they are right-- but not in the way they think. Individual Americans are not bound to keep making payments on a home because they signed the contract. They ARE bound to honor the terms of the contract. Same as any commercial borrower, they have the option to walk away from the deal, and accept the contractural consequences. We are a society that is based on law, and the signed contract is a form of law. That we must keep on making mortgage payments that take the food off the table-- well, that is just a myth.

Let us not forget those who are playing this for all its worth and for their own personal gain. I know of people who can well afford their mortgage and went the loan mod or short-sale route.  Another man (single) lost his job in September and immediately contacted his bank for a loan mod. Do you think he told them that he had a full 6 month severance package as they told him to stop making his mortgage payment?  And do you think he told them of the brand new home he was building in Costa Rica?  Or all the assets he has hidden? Did they think it was odd that he would only grant them access to page one of his tax returns?  I for one am fed up with it all.  If you really have a sickness, family emergency or are out of money, you have my full support and deserve help to keep your home. But until we get these rich sandbaggers to show their wealth when they ask for a loan mod or short sale, then I'm going to continue to think the system is indeed still broken.  You bought the house and if you can still afford the payment and your job is still there or if you have enough assets to pay it off many times over, then suck it up.

I aGREE WITH #11 and #23. This is such a scam and white collar crime is alive and well.

great blog...common sense seems to have fallen by the wayside.  Of course, it is one of the reasons that lenders are in this predicament!   My experience, and the collective experience of my colleagues in my network is that things are getting better. Today for example, Chase finally relented nad modified a loan that I have been working on in NY for over a year and they agreed to forgive some of the debt. Six months ago, this would not have happened.

Moving forward and helping as many familes stay in their homes is the best solution. It is going to take a villiage to turn things around and we certainly have a good start of candidates in the AR. Thanks for the post!

I agree with the concept that there is much blame to be shared all around, Ron #49 presents another aspect to be included in the problem.

I don't understand how the taxpayer is forced to bail out the banks, but the banks are not forced help out the taxpayer.

Unfortunately there are a lot of homeowners having this problem and would be willing to pay a lot more that the banks sell these homes for to someone else, all the while taxpayers suffer.

Bigger plot at play here. If whats happening now wasn't the plan, it would be changed and quickly.

It SEEMS like foreclosure is the worst option but if that's the case, why is it the path chosen most? If it were bad for banks or investors they would change it yesterday. So, the big question is, how is this good for banks and investors? No doubt some dark plot will be revealed that involves tax money going from your wallet into the bank/investors wallet just like TARP and the FDIC scam with the sale of Indymac to George Soros...

Wanna bet?

I agree, the cost of foreclosure is very high and the chaos that is creates is just as destructive as the financial side. Lowering values of neighborhoods etc.