What's On The Way?

How about this article from CNBC? (http://www.cnbc.com//id/26192036) It states that filings for foreclosures increased a whopping 50% compared with the same month a year ago. 50%!! And we can only assume it going to worse before it gets better. Because in reality, what has changed to make it better? Nothing that I can see.

Now read this quote from the article. "President Bush last month signed sweeping housing legislation that aims to prevent foreclosures by allowing homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan. The bill is projected to help about 400,000 households." Did you read that clearly? "Only if their lender agrees to take a loss on the initial loan" And what if the lender doesn't agree to take a loss on the initial loan? Hmm. Did our government pass some legislation that doesn't really help anyone?

Consider this quote from the article: "The number of foreclosures "could start to stabilize as early as the first quarter of next year if the government program gains any traction," said Rick Sharga, RealtyTrac's vice president for marketing. "That's really the unknowable right now." "if the government program gains any traction" (in other words, will the program actually help anyone) Say it one more time, Rick. "That's really the unknowable right now" Rick, I think we know the answer right now.

The lenders are concerned about losing money, not because the new loan amount will be less, but because the appraised value will be less than what is owed on the property. The lender will not want to lend out more money than the property is worth. However, they were the same lender the gave out the money to the home owner when the appraised value was higher when the initial loan was made.

So why does a lender have to lose money in the first place? Can't the lender just restructure the loan dropping the interest rate, keeping the loan amount the same but putting the lost interest in the back of the loan? Can't they raise the rate back up as the property values start to climb back? Isn't this better than waiting to see if the government program "gains some traction"?

Believe me. I know it is not this simple. But by letting so many homes go into foreclosure just makes the housing crisis even worse. It has a snowball effect that we just don't know the scope of yet.

I want the lenders to get paid back what they are owed. That's only fair. But I think the lenders also need to be more responsible to the people who need them the most: their clients.

It doesn't make sense to wait for a program to "gain traction" when the housing market already stuck in the mud.

And sinking fast.

If you have any comments on this article, I would love to hear what you have to say! Feel free to comment below.

Thanks for reading!

Dan Tenchall
Great Lakes Mortgage Funding

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