Essay on Proposed Methods for Solving the Foreclosure Crisis

Essay on Proposed Methods for Solving the Foreclosure Crisis

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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...


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...-out. This would effectively amortize or pay the loan down to the normal level upon sale, transfer or the end of the five year rehabilitation period.
 The borrower wins- as they save their home and there is a financial reward for doing so.
 The insurer wins- as there is reduced risk of loss
 The community- wins as it addresses the continued issue with increasing foreclosures
 The Investor wins- as the loans once again become performing
 The Federal Government wins- as the loss would be less than currently being experienced though FHA and the payment for the performance is not greater than currently being made.



Sources
Interview with Kimberly Cromer, Mortgage Operations Manager
Interview with Steve Demarest, Mortgage Banker
www.HUD.gov
www.makinghomeaffordable.gov
http://www.treas.gov/press/releases/reports/modification_programs_guidelines.pdf

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