Wednesday, November 07, 2007

Putting a stop to foreclosure.

If all of these lending institutions would just look at this the correct way, they could turn this mega foreclosure problem around. The market is already flooded with homes for sale in every single level. If I were a housing lender my first priority would not be to foreclose but to keep the foreclosure from happening all together. I mean, what good is foreclosing on a home and putting it on the market, probably at a reduced rate just to recoup their money, knowing its going to cost me, the lender. Would it not be much healthier for my firm to get with the home owner and work out a deal. Would it not be more cost effective to either wave the interest for a year or two or perhaps waving the interest and lowering the payment to something the home owner can afford? All in the effort to help the home owner over the hump. To me it would make for a more business proactive result than going through a foreclosure process then having a home I can not sell anyway in a flooded down turned market. After the term is up then the lender and home owner can sit down and renegotiate the deal with a selling clause. As long as the home owner keeps making the lowered payments they are able to keep living in the home but, when and if they decide to sell later on the lender gets to recoup their original interest and principal at the time of the sale.

It would be more profitable to let the person keep living in the home at a reduced rate because they are already invested in the property. They are also more likely to keep the home up because they have already been doing so. An empty, foreclosed home becomes a liability to the lending institution because 1) a vacant house loses value when it sits unsold for more than a few months. 2) there is the threat of vandalism which costs the lender. 3) Power needs to be left on (especially in winter to stave off burs ted pipes and flooding) and for potential clients. 4) a home not lived in begins to fall apart because of lack of maintenance.
The big plus for keeping the owner in the home is the income. A foreclosed vacant home is not an income producing vessel but more a liability. So, receiving a lesser payment is at least money coming in rather than money going out. I'd be much happier to have a reduced check from a home owner than none at all. Truly it is a win win situation that does not have to be tied to a concrete block sized contract. Keep it simple and straight forward without all the fancy double talk wording and fancy footwork financing. All those college boys who keep dreaming up all these way out finance ideas that are destined to crumble and cripple the home markets; Can those guys and get back to the business of honest straight forward thinking business.

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