The purpose of this writing is to analyze the foreclosure crisis and offer some solutions to keep people in their homes and satisfy the financial accounting records of the banking industry.
With more lost jobs on the horizon and fluctuating adjustable mortgage rates, the foreclosure crisis continues to plague America. A recent report from the Mortgage Bankers Association reveals that 14% of loans are behind or in foreclosure. This is largely due to lost jobs in this volatile economy. Many factors are involved in addressing a situation like this and one solution alone cannot solve the crisis. We saw millions of dollars in stimulus money go to lending institutions only to be left wondering why the problem is not going away.
There seems to be so many factors to this crisis it makes the head spin when trying to categorize and analyze them all. However, there are major points to be solved that, in turn, will solve the minor ones. First, property values have declined; so many homeowners are left paying a mortgage on property that is worth less than what is owed. Sometimes, much less. Equity built up for children’s college or retirement has been eaten away. The relief period for those with modified mortgages is not long enough resulting in at least half in arrears again after just six months.
Another problem we find within the crisis is government programs failing to live up to their promises. One such government program, Hope for Homeowners, designed to keep 400,000 mortgages from going in to foreclosure, has resulted in an embarrassing 25 refinanced loans. Also, bankruptcy judges are being given new authority to offer relief to homeowners. Good for homeowners, bad for banks. One sided solutions favoring either party are not going to solve the crisis. Stimulus money given to banks has apparently resulted in the banks staying in business along with balancing their ledgers, but with no relief for defaulted homeowners.
A few other problems that have arisen as a result of the crisis include lost revenue for cities, increased crime and, of course, more properties that are vacant. Many places are also reporting a large increase in homelessness. One group alone is not going to solve the crisis, nor is one solution by itself. There has to be a combined effort of three major groups and a set of several solutions deployed at once to gain ground and overtake the crisis. We will discuss this in the next section.
Currently, we are seeing some waffling going on concerning this issue in Washington D.C. along with some lending institutions that will not work with homeowners. This is where the start of the solution lies. The government, by means of a qualified representative, a large banking conglomerate overseeing lending institutions and a small group of geographically diverse homeowners in foreclosure will need to come together to form a coalition. This coalition’s sole purpose will be to work together,...