These days the media is saturated with stories and statistics about the ongoing foreclosure crisis in the United States. Real estate markets have been hit hard as a result of the recession and high unemployment rates. According to Foreclosure.com, at years end there have been a staggering 457,414 foreclosures in 2009, and even more that are currently pending. There has been a lot of blaming, discussing and complaining about the crisis, but there hasn’t been much talk and/or action taken to actually stop the seemingly never-ending loss of homes that has been sweeping the nation. Although there have been attempts by the government to resolve the issue through mortgage modifications, statistics on MarketWatch.com have shown that more often than not, within six months of modification the loans are again in default and subject to foreclosure action. The foreclosure crisis needs to be resolved on a case by case basis, with a combination of loan modifications, government assistance and credit counseling all in conjunction with a community service payback system.
There is not a one size fits all solution for the foreclosure crisis because the individuals that are in foreclosure each have different reasons for why and how they got there. The solution for each home is in the source of each borrower’s problem. Although, a substantial amount of foreclosure actions are more than likely the result of unemployment, some are the result of bad financial decisions, some predatory lending and some just downright greed. While pointing the finger is not going to solve the foreclosure crisis, it should play a significant role in how each individual case is handled. A government regulated organization should be established to review, categorize and determine how each borrower go to where they are and how their situation should be handled.
For example, if unemployment is the reason for the delinquent mortgage payments, the foreclosure action should be stayed for a minimum period of six months. During the stay period, the lender could accept interest only payments, or defer the payments similar to the way student loans are handled while students are in school. Just as students have to submit proof that they are enrolled and registered, the borrower would have to provide adequate proof that they are seeking employment. This could be provided by the unemployment office as they already have to provide proof to that department that they re seeking employment before unemployment compensation can be collected. This period could give the borrower time to find new employment and modify the terms of their loan in conjunction with any changes in their salary. The deferment program would only be offered to individuals who have previously had good credit, really good payment history and in cases where it is obvious that the only reason for default is unemployment.
If the borrower fails to find employment within the six-month stay period, the...