Crisis Deepens As Foreclosures March Ahead

During the past few years mortgage packages have been placed in the bond market and sold to investors as merchandise. Till now there had been a direct traditional link between the lender (usually the bank) and borrower. Thus all the apples have been put into one basket with the net result that if one begins to rot all the others follow suit. This bond link with mortgages has caused the disaster to go far beyond the points where the drama unfolded with only two players on the stage – the lender and the borrower.

The collapse of the sub-prime loan market has caused money to dry up. Wall Street is pulling money out of the market leaving practically nothing for the housing sector. It has begun to tell even on those with good credit history.

According to latest indications the situation is going to get worse.

It is not just the borrowers but the lenders too have been badly mauled. Most mortgage companies are tottering with lack of funds. How can they advance loans? Linked with the mortgage blues are the fate of all those in the housing market like building material suppliers, landscapers etc.

Already the headlines are hitting the stands. Norlarco – the biggest credit union in Larimer County has been taken over by the Federal regulators when its real estate loans defaulted from $6 million to $56 million!

The other three reasons for the debacle are reduction in income, divorce and illness. Organizations like Countrywide are trying to help victims keep their houses by awareness programmes and guidance tips. The lender must be directly contacted for temporary delaying of payments, setting afoot plans for spreading out repayment to take off the immediate pressure and modifying it to bring it down to an affordable amount by changing rates and extending time. Refinancing is also another option in which the old loan is paid off by a new one. If all above avenues fail then the house may be sold by avoiding foreclosures.

To realize the above the lender must authorize the housing counselor, give details about the loan, personal income and expenditure details, value of other assets, status of the property (foreclosed/bankruptcy suit etc) and statement regarding what is preventing the borrower from continuing with the payments. The last word of caution is a warning regarding rescue-scammers who will just fish in troubled waters.

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