Foreclosure is a very sensitive topic and one that almost everyone decides to look up to the tax payers to solve. This is not a feasible option, like tax relief or programs of payment assistance as that only adds to the economy spiraling down and not solving issues for the homeowners.
When faced with a person who is going through foreclosure the main concern of the lender is getting their money back. The capital invested in the buyer to purchase the house is ALWAYS secured by the house - but the interest is not. The issue that overwhelms a homeowner is a change in their income due to unforeseen circumstances such as death, illness, change in household (ie divorce) and unforeseen employment changes. That though to a bank is not IMPORTANT and this has homeowners avoiding the bank as the cold shoulder is what they receive. The best policy for a situation like this is communication.
There are two general homebuyers under stress profiles:
The homebuyer that needs time to get back on their feet and the homebuyer that can't afford it now and can't later and would like to downsize but can't because the house wont sell.
The best option so that everyone is happy is to allow only interest to be paid with no capital allocation. What I mean is - the interest the homebuyer is paying in their monthly payment should be the only payment they should be making with no contribution to equity. Though, the interest should be calculated as if equity payment has been made if interest only payments are made for more than 6 mos. The house will not go down in value thus equity is secured for the bank and the homeowner is still living in the house allowing them time to "get back on their feet". This option is kind of like a freeze option. Meaning that when equity starts to be paid in conjunction with interest a few months or a couple of years down the line, the homebuyer will then be paying the interest due "as if payments to equity were made all along" of the now, that is they will be paying the whole monthly payment as if they had been paying in a timely fashion from the initial payment of their home loan until today. The equity that has remained unpaid during the programs effect will be considered a seperate loan account called Homebuyer's Relief Account which will be...