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Win-Win versus Lose-Lose: Why’s the choice so hard to make?
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Editor’s Note: The following Guest Commentary was written exclusively for FlippingFrenzy.com by Larry Rubinoff, branch manager of a Clearwater Beach, Florida office of Mortgage Lending Direct, a dba of MLD Mortgage, Inc. Larry’s commentary is his and his alone and does not necessarily reflect the views or opinions of the management of FlippingFrenzy.com. You can read Larry’s thoughts here on FlippingFrenzy.com most weekends.
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Last weekend–in my guest blog entry here on Flipping Frenzy titled “Taking the Foreclosure Crisis Personally,” I posed the following question:
Would it not be better to freeze a [interest] rate for a homeowner who has been paying at that rate rather than foreclosing and kicking the person (and his or her family) out on the streets? In the extreme, would it not be better to cut the rate in half rather than foreclose
Now, U.S. House of Representatives member Barney Frank (Massachusetts) has outlined a $15 billion plan to buy distressed mortgages from lenders, saying the “cascade of foreclosures will continue” without government action. Frank, who chairs the House Financial Services Committee, is also said to be working on another plan to provide as much as $20 billion in loans and grants to purchase foreclosed and abandoned homes at or below market value to stabilize home prices.
While I do not agree with some of his proposals, I do agree with this (courtesy of National Mortgage News Online:
Under Rep. Frank’s plan, the existing holder of a mortgage would be required to write down the loan to a level the homeowner could afford. The write down requirement would not apply to investor-owned and second homes.
Just as I was saying last week, let the banks and lenders take action on their own, give back some of the windfall profits they made, reduce the rate of foreclosures, and allow more people to keep their homes. Logically, what choice do they have? Kicking people out of their homes and writing off the debt is not a sustainable strategy. Keeping performing loans on the books and maintaining property values makes a heck of a lot more sense.
Win-win versus Lose-lose; that the decision we’re faced with. And with an estimated 1.8 million new foreclosures projected for 2008, what are government and the private sector waiting for?
With a recession looming (I believe it’s already here but the so-called “experts” say it’s too soon to tell), the dollar weakening in world markets, and inflation threatening the basic survival of the average American family, I say corporate American needs to actively participate in the downturn as much as it did in the upturn.
If the lenders/mortgage note holders want to offer solutions to borrowers, they can. To Bank of America–which itself is facing billions of dollars in loses to foreclosure–and to the other financial services organizations that members of Congress (like Barney Frank) have been talking to about the crisis, why must it take an act of Congress for you to make such an easy decision? Each and every day you wait, thousands of people lose their homes and face the prospect of a very uncertain future.
What solutions do you–the readers of Flipping Frenzy–have? Maybe we can compile them in the Comments area of this blog entry and send them to Rep. Frank!
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Look at the quoted numbers:
Approx 500,000 new homes without owners
1.28M foreclosures
?? unknown number of homes encumbered with mortgages higher than the collateral worth of the home
?? unknown number of mortgaged homes with unfixable defects.
And the Fed and the gov’t considering the same maneuvers that created this unstable condition to fix the condition.
http://www.bloomberg.com/apps/news?pid=20601109&sid=au67GKPyS_Dg&refer=home
Vacant Homes in U.S. Climb to Most Since 1970s With Ghost Towns
By Brian Louis and Dan Levy
About 370,000 new homes are for sale because people who initially contracted to buy them backed out, according to estimates in a Feb. 15 report from analysts at New York-based CreditSights Inc. An additional 216,000 homes are under construction, according to Commerce Department data.
http://www.bankrate.com/nltrack/news/mtg/20080221_mortgage_numbers_a1.asp
Just how bad is the housing market?
By Marcie Geffner • Bankrate.com
More than 1.28 million properties were the subject of some 2.2 million foreclosure notices in 2007, according to RealtyTrac, an online marketplace for foreclosure properties. Those filings affected only 1 percent of the nation’s households, but the 2007 total increased a whopping 79 percent compared with 2006.
http://www.nytimes.com/2008/02/29/us/29walks.html?_r=1&adxnnl=1&adxnnlx=1204401809-JD1Gj8/q07pzUEFBlsbi2w&oref=slogin
Facing Default, Some Walk Out on New Homes
In a declining housing market, he owed more than the house was worth, and his mortgage payments, even on an interest-only loan, had shot up to $2,600, more than he could afford. “I was terrified,”
5 Minute interview re: the economy -
http://www.youtube.com/watch?v=0EZeNulOz9E
RE: the artificial money supply
Ben Bernancke re: value of the dollar?
http://youtube.com/watch?v=gldETRlhiXk
http://youtube.com/watch?v=nj9KHJRRUbQ&feature=related
Wikipedia link re: the money supply (M1, M2, …)
http://en.wikipedia.org/wiki/M1_%28economics%29#United_States
Gutsy Lady, (Aimee Allen) ! ! ! ! See the comments below the video!
http://www.youtube.com/watch?v=SBCKMTo210k
US News 7 World Report / Economists comments on a gov’t bailout
http://www.usnews.com/blogs/capital-commerce/2008/02/25/should-feds-fix-the-housing-market-failure.html
Builders Campaign contributions again
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/28/BU14V9OMO.DTL
Comment by HappyDance — March 3, 2008 @ 4:35 am
The legislation was not specific enough to rein in these mortgage and collection companies. They have already received their money and could care less about the families they are kicking out on the street. My company, Aurora Loan Services, is foreclosing on us over $5,000. I was sold to them by Homecomings Financial while I was under a forebearance/repayment plan. The amount we had already paid did not get transferred to Aurora and Aurora took the 2 months payment we were late and started tacking on $600+ a month in fees. If we were having trouble paying the $1000 a month then how were we going to pay $3600? Of course that kept adding up as time went on. We had been trying to pay what we could every month and had tried for months to get onto a repayment plan to no avail. On Oct. 31, 2008; we received a letter stating our payment would be returned and we would be foreclosed upon if we could not come up with the $5000 in payments and late fees we owed. We were served foreclosure papers in Nov. 2008 and then started getting phone calls from Aurora saying they wanted to work with us. I even tried to get helped by the Hope 4 Homeowners and they would not help because our credit score was too low, of course it is we are in debt and getting foreclosed on for a reason! It took until Jan. 2009 to get a payment plan worked out and we were told after the 3rd/ last payment to submit all paperwork for a loan modification. I thought we were saved!! A week later I get a letter saying we were denied the modification because we could not make the payment. I called on speaker phone with my husband to find out what this meant. After a half hour of run around the answer became clear, Aurora will not help us unless we are “current” meaning either give them $5000 or get foreclosed on. Why would I need a modification if I was current? Why can’t they just put the $5000 on the end of the loan and let us keep paying? At this point my ARM is low and managable but a fixed lower rate would also help. They refused and the lady would not even give me her last name or phone extension. I have all of the paperwork that can prove we have been trying to work this out.
Comment by Chrystal Desorosiers — April 6, 2009 @ 2:54 pm