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The bailout package that has become law will hardly have a sizeable impact on local foreclosure problems. The focus of the bill is on the jumbo financial institutions of Walls Street. The measures are dependent on their voluntarily coming forward and this might not be sufficient to tackle acute foreclosure problems.
According to the bill the government acquires the right to purchase $700 billion worth of securities that are backed by mortgages. The secondary aim is to keep the people in the houses that are their home. The Treasury Secretary Henry Paulson refers to the bill as an implementation of plans ‘to mitigate foreclosures’ and to ‘identify opportunities to modify loans’. The government is expected to work with the lenders to ‘encourage loan medications.’
The critics opine that the terms are lacking in punch and not forceful enough. Paul Leonard of Center for Responsible Lending comments that although the government will be buying up these securities it is not congenial towards expansion of loan modifications. The government by itself cannot alter the loans because of the manner in which these are structured. Without this unquestioned authority this surge of foreclosures calculating approximately to 500 per week cannot be stemmed. The more bank owned properties slide into the market the more will the real estate market slump.
Timothy Canova of Chapman University School of Law, South California put it aptly, ‘If you don’t firm up the bottom of the housing market, the bottom of the pyramid will be like quicksand that will keep pulling down the structure.’ He apprehended that within six months or at the most a year another enormous bailout will be pleaded for to deal with the basics of the foreclosure problem.
This exchange of opinions is leaving many like Ianthia Turner of Lincoln nervous. She owes the lender $75,000 more than the value of her house. She is current on her mortgage payments but last month her husband lost his job in the local bank. She dryly commented, “We’re just holding our breath.”
The banks have repossessed more than 231,000 houses since 2007 according to DataQuick. Many others like Turner want to come to a workout with their lenders. So far only 22% of those in default were able to escape foreclosures. The general complaint is that although the banks hardly outright refuse to talk but when it comes to producing action they are very slow. In foreclosures, time is the vital factor for the borrowers.
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2 Responses
The good people of the USA need to establish an alternate currency with an alternate monetary system .
President Clinton is too blame for this far more than GWB. All you have to do is look at the chart of AIG, Fannie, & Freddie to see their big climb occured during Clinton’s presidency. They begin to flat line during Bush’s.
Several Republicans warned of this disaster but Democrats like Dodd, Frank, & Schumacher rebuked them.
Assigning blame won’t solve anything. We need legislative action to establish a legal gate to control the flow of foreclosures. That flow should be determined district by district based on a tolerable threshold.
While a foreclosure is blocked by the gate, an indep/govt arbitrator should be used to attempt a solution between lender & borrower as the state as an avid interest in the mortgage w real estate taxes & foreclosure costs.
From the Wall Street level, the bank should be able to request a credit line from the Fed equal to the mortgage values they choose to delay foreclosure on. That provides them incentive to work deals to prevent foreclosures on the troubled mortgages. Like the CRA rating, the bank should earn credits for each mortgage they are able to save & lose credits for each one they foreclose on.