How would you suggest that we fix the Foreclosure Crisis?

By
Real Estate Agent with Winter Garden, Florida

I have seen a lot of posts about who caused the foreclosure crisis we are currently facing, but I haven't seen too many ideas on how to fix it. I'd like to hear some ideas and opinions, as well as a brief description about your own area's situation. Is it improving? Is it getting worse? Has it become stable? I am currently a speaker for the Florida Housing Coalition and I will be using any information I can gather for a brief on some facts.

The next seminar I will be attending is for First Time Home Buyers and how to avoid the many pitfalls that they could face. I thought it would be a great idea to give them some real examples from real people who have been where these buyers do not want to go. In my past events I have noticed that I get a great deal more responce from the attendees when there is a story that they can all relate to. Any and all posts would be greatly appreciated and put to use helping to prevent a future crisis for many homeowners. So please help me build this posting as it is of great importance and your input is critical.

Thank you in advance and God Bless!

Comments (8)

Anthony Dashtizadeh
Garcia Realty Group, Luxury Sales Group - Potomac, MD
(Dash-T-Za-Day)

I think it goes hand in hand with theglobal economy. The sooner we declare a recession and start suffering the sooner things will get better. This foes not apply to specific areas of course.

Jun 23, 2008 06:14 PM
Darrel Davis
Winter Garden, Florida - Winter Garden, FL
Southern Heritage Realty

Anthony: I cant say that I agree with you that our foreclosures are related to the global economy. I have my own take on what happened, but I am refraining from posting it so that I dont steer the direction of any posts. Thank you for posting your input, my opinion may change with supporting comments.

Jun 23, 2008 06:27 PM
Kevin Corsa
H.I.S. Home Inspections (Summit, Stark Counties) - Canton, OH
H.I.S. Home Inspections, Stark & Summit County, OH Home Inspector

Well, now that there are no more sub-prime mortgage lenders, I think the choices and the pitfalls have been significantly reduced. No longer can anyone finance 110% of their homes worth, or take on a mortgage that equals 50% of their total income. A lot of the blame has to be placed on the previous lending community.

Jun 23, 2008 10:54 PM
Wayne Gabriel
RE/MAX Premier Group - Wesley Chapel, FL
GRI, SFR 203K Certified

I agree with Kevin regarding blame.

I think it will be a couple more years before we're through the foreclosure/short sale market. I also think we're at or near the bottom price-wise in our market. Home prices are finally at a level that is affordable enough for first time home buyers to enter the market and most homeowners are only selling because they have to or to take advantage of low prices and interest rates.

The only way to fix it is through personal responsibilty, debt restructuring, re-financing, etc.

Advice to first time home buyers:

  1. Stick with established, conservative debt & obligation ratios.
  2. Purchase no more than 80% LTV.
  3. Put as much cash down as possible reserving enough to cover several months of expenses.
  4. Borrow for the shortest term and lowest interest rate (obviously) possible (& don't pay points).
  5. Stay away from ARM's, baloons, etc.

I don't know how we got away from these ideas to start with...greed, I guess. Hope this helps.

Jun 24, 2008 02:30 AM
Darrel Davis
Winter Garden, Florida - Winter Garden, FL
Southern Heritage Realty

Kevin: I would have to agree with you to a large extent about the blame. Lenders cover a huge portion of the guilt (from the situations I have personally seen)

Wayne: Great Suggestions. I'll add that to the checklist for these new buyers to work from when shopping for a home.

Jun 24, 2008 02:40 AM
Darrel Davis
Winter Garden, Florida - Winter Garden, FL
Southern Heritage Realty

**bump**

Jun 24, 2008 05:53 PM
Fred Poehlman
Independent Broker Network, LLC - Waterford, MI

There is enough blame to go around, including us, the Realtors. The root cause seems to be people living in $500,000 houses that could only afford $250,000 (adjust the prices to your area), but were convinced the ARM could be reworked in a few years. We all know what happened. Foreclosures not only created an excess of supply, it reduced demand because the people foreclosed on can not get a mortgage for years.

The government wants to step in and help them now. Without arguing the merits of "government help" and realizing the is an election year, how about this? The FHA will evaluate each case and if they find the above to be true, they give the foreclosed people a mortgage for a house they can afford based on their current income/debt and ability to pay. Basically they now buy the $250,000 house they should have purchase a few years ago.

This does not sovle every case but could go a long way to help, with out taking the tax money of the people who did it the right way.

I know this is simplistic, but may be a start???

Jun 28, 2008 11:10 AM
Darrel Davis
Winter Garden, Florida - Winter Garden, FL
Southern Heritage Realty

I would like to see some FHA "Downsizing" programs to help keep people in their homes. I wouldnt really suggest that FHA buy their home out, but merely get them a more affordable home and let the short sale process work on their existing homes. I meet with about 15 to 20 customers a week that are in, or just starting the process of foreclosure and I have seen a lot of examples where this would help. The crisis we are in is very broad, and no situation is the same. Thanks for the posts to date, they are very helpfull.

Jun 28, 2008 03:56 PM