My last blog inspired me to write this new one. We all have been reading and experiencing the massive foreclosure problem caused by the subprime mortgages. Also, we have been listening to the different proposals of Barack Obama, Hillary Clinton and John McCaine on how to solve or not to solve the foreclosure problems. Billions dedicated for bail outs some propose, others not so much help. Changes in the bankruptcy laws to protect people about to lose their homes to foreclosures.
I have never been too sympathetic to the fact that the foreclosure laws were so drastic and devoid of solutions. Either you pay or you are out. No negotiations. The power to wipe out Junior Liens with no compensation. The stain in your credit report for so many years.Too much power to the Lenders.
Not long ago, I thought everyone should be saved from losing their home just like Hillary Clinton and Barack Obama propose. Now, I am not so sure.
I still believe that Lenders are to be blamed for the subprime mortgage crisis. After all, "they invented the no income verification, no downpayments, low teaser rates and it does not matter if you have bad credit" deals. On the other hand, a lot of people can not afford their homes. They just bought because in many instances was cheaper than renting.
If you were offered no downpayment, no income verification and a teaser rate lower than your rent payment, it would be kind of foolish not to accept knowing that homes were appreciating every week.
Now that the crisis exploded, I know that many people simply can not afford to make their mortgage payment and still eat. Those unfortunate borrowers should go into foreclosure and rent again. They could not afford their homes to begin with. Besides, as a consolation, they did not invest any money when they purchased their homes.
Now, if I was going to fight hard for people to keep their homes, I would choose to fight for the ones that put hard earned down payments into their homes and are now in danger of being foreclosed. I would work hard to force lenders to do loan modifications, put defaulted payments on top of the principal and start all over again adjusting their mortgage payments to the present 30 year fixed rate mortgage. Increases on the teaser rates are murderous. I would even go a little further. If they could not handle the fixed rate payment of a loan modification, I would lower it one or two percentage points for two years. That would give these borrowers the chance to catch up. After all, many of these people invested their life savings into their homes.
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