Really? Halting Foreclosures Will Help the Economy
In their zeal to get homes on the foreclosure auction block, questionable practices were implemented by banks including forging
J. P. Morgan Chase and GMAC/Ally Bank have announced that they are freezing foreclosures in the 23 states that process through the court system, or judicial foreclosures. So far only Bank of American has announced they are halting proceeding in states with both judicial and non-judicial actions. Arizona is a non-judicial state and processes foreclosures established by our state statues without court intervention.
The New York Times reported that if the foreclosures are delayed, or never happen, housing prices may find a floor. Economist Karle E. Case was quoted as saying that this may “encourage the lenders to work out deals that are to the benefit of everybody.”
To paraphrase a Saturday Night Live segment: Really? According to an article in the Wall Street Journal as of August, there were more than 4.4 million home loans that were either in the foreclosure process or 90 days past due, according to mortgage research firm LPS Analytics. Since 2006, about 6.4 million homes have been lost through the foreclosure process.
With the number of vacant homes caused by the overbuilding in Arizona and the number of homeowners abandoning their homes daily, it makes you wonder what our government and economic experts are smoking in their non-medical marijuana. Do they really think if we ignore the millions of foreclosed homes that they will melt into thin air?
When the big boy banks were in danger of crashing, our government doled out mega bucks to keep them propped up. And yes, it worked, for the banks. They used their windfall to buy other banks or shore up their reserves. Now their profits are healthy and a few have even paid back the government.
Our countries unemployment rate is nearly 10%, yet the bank’s are not using their profits to hire personnel and train them to handle foreclosures correctly. Nor were the profits allocated to help homeowners keep their homes.
Foreclosures are only one piece of the ongoing economic drama. Zillow.com reports that nearly 50% of our homes in Arizona are in a negative equity position, or underwater and 23% nationwide.
The modification programs with the acronyms HARP and HAMP were established so families that qualified (good income, and low debt) could have a more affordable payment. But at what cost? To have principal placed on the back end? A low rate for a few years? Their credit is so trashed from the requirements of the mods, they may not qualify for another home loan for years.
Short sales are anything but short. There are no statistics to quote, but conventional wisdom states that over half of the short sales are turned down by the banks after months of waiting. Or worse, the banks never respond. They punish the sellers that are trying to do the right thing by forcing them to miss payments until the short sale is approved. Their punishment is ruined credit and possibly a foreclosed home.
Another bill is under consideration called HOME: Housing Opportunity and Mortgage Equity Act, to help people unable to qualify, to refinance at today’s lower interest rates. Critics are screaming that it is not fair to the homeowners that are not underwater.
The housing market is a government-made bubonic plague prohibiting our economic health. We need bold laws, not smoke screens, to treat and treat it quickly, with a mandate that will allow us to lower house payments, so we can spend money on other necessities. If we continue to pretend the toxin does not exist, it will continue to seep into all areas of our economy. The only survivors may be the banks and the economists.