Government and Lenders Need to be More Aggressive in Helping Beleaguered Homeowners!
Here is an article I recently saw in the Los Angeles Times, that I thought was very appropriate for investors looking at buying properties. The investor should aggressively target these homeowners that are either in pre-foreclosure or in the bankruptcy stage. Not to take advantage of them, but rather create a win-win solution that both the investor and the homeowner can live with. Yes, I realize that many deals will not work, but many will work. This article strongly indicates that the foreclosure crisis will not be over until we start putting people back to work.
Three years have passed since the housing bubble burst, and yet the number of mortgage defaults and foreclosures continue to increase. RealtyTrac
tallied up a record 2.8 million homes that received at least one foreclosure notice last year, and predicted that 4.5 million would go into foreclosure this year. If so, that would be nearly one out of every 20 homes. Analysts also estimate that there is a “shadow inventory” of 1.7 million to 7 million homes in foreclosure that lenders haven’t yet put up for sale.
The extremely high foreclosure rate is a problem not just for the individuals at risk of losing their homes, but also for their communities, the housing industry and the economy in general. And the problems are mounting despite the signs that fewer homeowners are falling behind on their payments, home prices may be hitting bottom and more troubled borrowers are benefiting from federal aid programs.
As of January, nearly 1 million homeowners were receiving at least temporary help through the federal Home Affordable Modification Program. But lenders are still moving too cautiously, hampered by financial complexities (such as mortgages that have been bundled and sold to investors), insufficient staff to handle the volume of modifications, uncooperative borrowers and loan servicing companies that profit from delinquent loans.
Admittedly, some borrowers took on such outlandish amounts of debt that their homes can’t, and shouldn’t, be saved. And the current loan modification programs, which are designed to help people with predictable incomes, may not be much help for homeowners who are in trouble because they have lost their jobs. Nevertheless, too few loans are being modified and too many of the modifications haven’t given borrowers a meaningful break. That’s one reason so many of the borrowers who’ve been given a second chance have defaulted again. The re-default rate drops considerably when lenders write off some of the debt, yet for the most part they’ve been either unwilling or unable to do so.
Last week, President Obama launched yet another initiative to avert foreclosures, offering $1.5 billion from the $700-billion Troubled Asset Relief Program to housing finance agencies in California and four other states where home prices have dropped by at least 20%. The administration gave states a great deal of flexibility in using the aid, which will help them craft programs for those who owe more than their homes are worth or who have lost their jobs and need temporary or transitional help.
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