The media has cast the shadow of blame for the Foreclosure, on several different sources. The first of these sources is the mortgage banking industry itself. The reason being it’s poor credit underwriting. Wall Street is also in the shadow of blame for its collecting these loans and then selling them on Wall Street. And of course, the borrowers are also largely to blame for this catastrophe. They buy properties hoping to flip the houses for a great profit due to the increasing property values.
The Obama administrations have tried multiple refinance programs to reduce the amount of defaults, such as, Hope for Homeowners, and Secure for the Delinquent Borrowers. But those programs have not succeeded in their goals. And the Home Affordable Modification Program, who stated a goal of helping 400,000 homeowners avoid foreclose, has also failed to succeed. While these were all valiant efforts to solve the problem, they did not.
There are several ways that the foreclosure issue should be dissected into, discussed and solved. The first are the borrowers who bought investment properties. They bought what they saw as an investment, but, for the most part, did not profit from it. They gambled with their money and when it didn’t turn out the way they expected, they just walked away, leaving the lenders empty-handed. The lenders should have tried to make up for their losses by putting a deficiency judgment against the borrower after the foreclosure. This would inhibit other borrowers from just putting the loss in their past and moving on to another property and another lender. It would also make them think twice, and research the odds of a profitable out come the next time they decide to invest in properties. Thus reducing the amount of investment properties bought and foreclosed on, and would reduce the decrease in property values, especially in areas like Miami, Florida and Las Vegas, Nevada. Which happen to be two hot spots for foreclosure.
Another kind of borrower that needs to be examined more closely is those that belie facts on their loan applications. The most common fact distorted on a loan application is income. Many people overstate their incomes to try to get a loan and while some lenders recognized the error, others did not. When a borrower is rejected by one lender due to overstated income, they just find a lender who will qualify them based on their stated income without proof of such. Some blame the lenders for this over-sight, but the borrower is equally, if not more so, to blame for the fraud. But they do it because the punishment of a fine, or imprisonment it not enforced.
The next group of borrowers really does need and deserve help. These are the borrowers that go through life changing events such as a death or loss of a major community job source. Not only is this out of their control, but it makes their financial situation a lot less comfortable. Not only do they have to deal with the grief of their loss, they also have to...