Foreclosure Intervention

The programs designed to save borrowers from default and foreclosure have for the most part been less than satisfactory. The number of modifications encouraged by government programs have been far fewer than predicted, and the results have been disappointing. Approximately 1/2 of modifications that took place have resulted in new defaults, simply wasting time and resources and prolonging the agony. Now a new and improved approach to reduce principal balances for first mortgages and for Equity Lines of Credit has been floated as a solution. Nothing will dissuade government types from tinkering in the marketplace, apparently. The problems originated with the government, encouraging lenders and the GSE's to make bad loans to people so that everyone was able to own a home, as if that were a natural right, and then when it became apparent that economic forces rather than social engineering should have been in play, once again the intervention to prevent the disaster resulting from bad policy has simply prolonged and worsened the problem. With our 24 hour news cycles and a voracious appetite to come up with "news", every little blip in market performance is viewed as dramatically important. "Home prices rise .4%", "Foreclosure notices increase", etc. This type of reporting is usually politically driven and does not accurately reflect the state of the real estate market and is useless for making personal decisions. Real estate is local, so if you're in the Northeast, conditions are improving. Of course the government has been pouring money by the billions into the financial sector, and hiring for government jobs at higher than prevailing wages, so naturally things are better in that area. Florida however has a glut of over 500,000 backlogged foreclosure filings and the courts have petitioned for almost $10 million dollars to hire people to handle the work. No one is certain about the size of the "shadow inventory" of troubled mortgages, but the certainty is that it is huge. The activities and dithering of the government keeps the banking industry off balance so the loan servicers are not following a logical and smooth progression in filing defaults, foreclosing, and selling off the bad debt. The "shadow inventory" is held to escape taking a certain loss and damaging the balance sheets while there is any possibility the government will come up with some new program to bail them out, at least partially. When there is some certainty that more help is not forthcoming, this inventory is going to be released, in a dribble or a stream, but released. The impact on home values is for sure going to further depress them. The activities of the government are only delaying the inevitable and postponing a return to some semblance of normalcy. The mortgage intervention by this administration is such a small part of the total intrusion in our lives; student loans, health care, auto manufacturing, and no end is sight, that how much our homes are worth may be the least of our worries. This is community organizing run amok.
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Your Credit/Your Government/A Dirty Little Secret

This is an interesting article on many levels. First, the intended subject, to tell people that applying for loan modification will do a great deal of damage to their credit scores, is an important fact for people to know, but within the article just look at some of these things. Two government approved counselors, charged with giving advice to troubled homeowners, profess a lack of knowledge of this consequence of their counseling and are surprised at the "unfairness" of the practice of lowering scores for people who confess to being in trouble with their finances. The naive lack of understanding of the purpose and function of scoring may be excusable on the part of the borrower, certainly not on the part of a credit counseling professional. Credit scores are not the equivalent of a star on the forehead as a reward for past behavior but are designed as a predictor of likely future behavior and a warning system for future creditors. Applying for loan modification, much like hiring a credit consolidator, is an admission that things are not going well, and the precise duty of a credit reporting agency is to hoist the flag of warning for future creditors, and the mechanism used is to reduce the score. The person in this article adopts the attitude that someone should have told him. This is pretty much typical blame shifting behavior and a much better approach would suggest that he should have asked. Actions always have consequences. On a broader note, as an included point in the article, he went from a Public sector job to a private sector job and took a pay cut of approximately 30%. This is simply a stark example of the fact that public sector employees, in general, are paid too much and have much too generous benefits, which are about to overwhelm the economies of all governments, local, state, and federal. The pension programs and pay schedules are unsustainable and the current state of the economy is only revealing what has been bubbling to the surface for some time.
Our office stands ready at any time to offer counseling to people headed for, or already in trouble with real estate debt. We don't charge a fee and we don't have any hidden agenda to sell you anything. When things get better maybe you'll remember us kindly and then we can do some business together.
Just in case you thought things were getting better, here's another article for you on California real estate.
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Foreclosure and the market

Almost all of the government intervention into the real estate business has been ineffectual. No news there really since they are unable to understand business of any type and make a mess of anything they touch. "They" being legislators and bureaucrats alike. Individually and collectively their need for power and control and unremitting greed drive them to confound the performance of the free market, cause and exacerbate economic problems, and enrich themselves. Dodd, Frank, Obama when a Senator, were recipients of the lion's share of gratuities from Fannie Mae, Freddie Mac, and major financial institutions, and they are still driving legislation to further enrich their friends. Frank recently called for major investors in Home Equity credit lines and other secondary mortgage financing to reduce the principal balances on these loans to benefit troubled borrowers. Such loans make up billions of dollars of highly toxic assets for these institutions and their write-down would be calamitous for their balance sheets. While one would expect the institutions to resist this encroachment on their business, quite the opposite is true. They welcome with enthusiasm this government directive, saying they welcome the opportunity for "guidance" from the government, meaning no doubt, a government plan to once more bail them out of their bad debt and remove one more more hazard of their unconscionable risk taking. This likely reach into the taxpayer pocket for the benefit of banker friends one more time is simply the continuing cronyism of politicians with their supporters. Color me suspicious, but I think Frank had discussions with his friends long before he floated this notion so that it would appear to be an economic necessity rather than another helping hand for friends of those in high places. One article is here, another is here.
This is the same Barney Frank who recently warned that investors in Freddie and Fannie are likely to take a severe hit because of their losses, despite his protestations not that many months ago that there was no possibility of a loss by these institutions. Letting these clowns play with our money is a very expensive proposition, and they seem immune to punishment for their cavalier disregard for truth, ethics, and honesty.
Foreclosures are continuing, home prices continue to fall, the government continues out of control and the HOPE & CHANGE we're now looking for is a return to republican principles. That's a small "r", so no one is offended.

As usual,
Thanks for visiting