Foreclosure Solutions

May 19th, 2008 | Tags: Foreclosure Solutions

Considering the size of the problem speedy foreclosure solutions are imperative. Before solving anything, it is necessary to know about the nature of the issue from a wider and broader perspective.

The first sufferers are the community members. Hence as soon as the seeds of foreclosure begin to sprout it is time to become alert. The problem has to be identified and in this matter the lead is given by community welfare groups, business concerns and faith based organizations. These are the grass level activists who communicate the problem to the local and state officials.

It is easy to understand that the owner of the house and the neighbourhood are not related or independent of each other. In economics parlance it is known as neighbourhood externality. Positive externalities are beneficial while the negative ones cost the entire locality.

The stakes are very high in the foreclosure problem. Vacancy leads to criminal and health problems as well as demographic changes, closure of business, decline in tax collection, fall in house prices, rise in municipal expenses and increase in predatory lending as well as scams. Thus foreclosures negatively affect all and not just the two contenders – the lenders and the borrowers.

On an average it is estimated that a foreclosure costs the borrower $7,200, the lender $50,000, the local government $19,227 and the value of the neighbour’s unit $1,508. Thus the total loss is $77,935.

At this stage it is the local organizations that can play a vital role in establishing contacts with the lenders, organize support for stopping of foreclosures and even raise capital to tide over the calamity. When various local organizations club together they can be even more effective. The St. Louis Foreclosure Prevention Task Force can be cited as an example.

Local actions are pivotal in foreclosure prevention because the housing market is a localized matter. Thus some regions are more affected than others. The local organizations have the power to reclaim, recycle and rehabilitate foreclosed houses. The local watch programmes will be more efficiently capable of tracking the units already in or about to enter the foreclosure zone. Neighbours are the first ones to take up cudgels against nuisance related problems. Municipal housing courts can address the issue of vacant abandoned units. The banks dealing with REO properties are actively working with local bodies to help out the selling of such units to responsible parties.