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.
As usual,
Thanks for visiting.