Home Foreclosure News of the Day: Rumblings about Giving Homeowners Principle Reductions Start to Get Louder as Foreclosure Crisis Drags On
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In the May 9th post here entitled, Foreclosure Crisis Deepens Yet Again: The One Thing Lenders Won’t Do That Could Significantly Decrease Foreclosures Immediately, we stated:
How do we get out of this mess is the question; one that no one has been able to solve. But, there is a solution. Lenders hold the key to it and the vast majority of them just aren’t willing to exercise the option. What is it?
Stopping Foreclosure: The One Thing Lenders Could Do to Stem the Tide of Home Foreclosures
Reduce principal balances. What exactly does this mean?
What is a Principal Reduction? It’s when a lender agrees to “forgive” part of the outstanding balance on your loan.
And we’ve been saying it since before then. And, this is just a tiny real estate blog amongst millions of others on the net with no influence. If WE can see the wisdom in this, then why can’t the so-called big whigs (bankers, legislators, etc.) see it?
Now, rumblings of writing down principal balances have started again. According to the Bloomberg /BusinessWeek article, Raskin Says Mortgage Terms Work Against Borrowers, Banks:
Raskin [the Federal Reserve Governor] said . . . that she is starting to hear more discussion about the possibility of loan principal reduction as a solution to foreclosures. . . . “I see people beginning to talk about principal reduction again whereas it had waned in influence,” she said.
Why Are Principal Reductions Being Talked about as a Solution to the Housing Crisis NOW
Well, duh! The economy still sucks and even though foreclosures are down, people are still struggling and more homeowners are falling further behind paying their mortgages.
Post Continued Below . . .
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The Obama administration has tried program after program (to their credit) to fix the home foreclosure mess, but banks and lenders – to date – haven’t been playing much ball. And, the legal maneuvering surrounding the housing crisis hasn’t had any teeth, so there’s been no incentive for them to play ball.
What the so-called financial, housing, real estate and banking experts seem to fail to realize is, as my mom used to say, “You can’t get blood from a turnip.”
Another thing she used to say is, “You can’t get what I ain’t got!”
Plain and simply put, many homeowners are broke. Banks are not going to get paid the interest charged on exotic loans that were extended at the height of the housing crisis.
Zero Down Home Loans – 580 Credit Score
I was a loan officer for a brief period during this time and I saw people with 580 credit scores getting zero-down home loans, but with interest rates of 8 to 8.5 percent on an 80/20 loan (first loan) and 10-12% on the second (20%) loan.
Or worse yet, interest only loans where the payments adjusted up in 3, 5 or 7 years – just as the economy started to tank.
How many homeowners got raises to keep up with escalating mortgage payments? Not many.
What many DID get were pink slips – just when those mortgage payments were going up.
And lenders still want to stick to those ridiculous terms.
Yeah, yeah, I know . . .It’s not fair to the Average Joe Homeowner who didn’t get an exotic loan and who didn’t buy more house than he could afford and who had good credit.
But, foreclosures depress all surrounding home values. And, the third wave of foreclosures was The Average Joe with the good credit and “stable” job, remember?
So in essence, we’re all in the same boat and the sooner we wrap our brains around that, the better off we’ll all be.
REAL Advice on How to To Stop Foreclosure
It’s time for all of us to suck it up, quit the bitching and just do what we need to solve this thing (home foreclosure crisis) once and for all so we can all get back on the road to economic recovery. This means that it’s time for banks to play ball and give things like principal reductions and workable home loan modifications.
Otherwise, OF COURSE the housing crisis is going to rage on.
“Duh!”
Note: If you like this post, please send it to everyone you know with common damn sense who’s ready to see an end to the housing crisis. Tell them to tweet it, blog about it, write their senator, their lender, their banker and the President. In short, anybody who’ll listen to reason when it comes to this mess.
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Copyright © 2011 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.