The Foreclosure Pain Could Last Years

the U.S. housing market could prolong the economic recovery because of long delays in dealing with defaulted mortgages. This has been the topic of debate over whether it is best for America to deal with millions of foreclosures immediately, or to slow the process over a few years. The major argument for allowing the processing foreclosures to all happen quick, is that there will be a purging of bad loans followed by the beginning of the mending process for the industry. The opposing argument is that by slowing the foreclosure logjam, the economy and housing demand will have time to recover. It appears as though we are taking the latter course, for better or worse.

Since the crash of the housing market, economists have predicted an uncontrolled surge in foreclosures. “Like everyone else, I’ve been waiting, but we’re not seeing the big influx that was expected,” said Jim Summers, an agent with Re/MAX Golden Empire. “At this point, I wouldn’t bank on anything.” Many real estate experts now say it’s not clear that the massive second wave will even come. This would mean that the approach we are taking appears to be successful. Of course, foreclosure’s are not in anyone’s best interest because they drive down home prices, and keep banks skiddish about their lending practices. Right now, mortgages are much more difficult to obtain as a result of an over-conservative lending psyche

The government is trying to control the downward pressure on the nation’s economy that the millions of foreclosures have caused. Banks are fighting to keep value of their mortgage assets high, and cities don’t want their communities to suffer the massive losses from mortgage defaults. “As long as interest rates stay low, I think banking and government interests will be able to maintain some degree of market stability,” Conway said. The home foreclosure process now takes double the time it used to. A large reason for the longer delays are loan modification efforts to avoid losing thousands of dollars in the foreclosure and resale processes. These loan modifications are a noble effort in the short term, but a majority of them default on their modified mortgage within a year.

The foreclosure process is also being slowed by staffing shortages at lending agencies and bankruptcy filings. In states where foreclosure is a judicial process, it now takes about 19 to 29 months, and in other states it takes 11 to 17 months. The slow foreclosure process has two consequences. First, it keeps families in the home longer during the foreclosure process, which is good for any troubled family. However, this is slowing down the economic recovery, possibly by as much as 5-10 years. Regulators insist that banks have an incentive to stall the foreclosure process. When lenders have foreclosures on their books, they bulk up reserve funds to cover toxic assets. When banks can process and finally clear all of the foreclosures off of their books, they will have the liquidity to lend again. Until mortgage lenders feel comfortable with their liquidity, and have legislative support, they will not finance mortgages for any candidate that is not absolutely perfect.
California Loan and Refinance Services by SD Mortgage Group. Our 58 years of experience in California home mortgages make us your best home finance option.

Related Articles:

The Wall Street Journal. Complete Personal Finance Guidebook (The Wall Street Journal Guidebooks)From America’s most authoritative source: the quintessential primer on understanding and managing your money

Money courses through just about... Read More >

Get a Financial Life: Personal Finance In Your Twenties and Thirties
“A highly readable and substantial guide to the grown-up realms of money and business.” —Deborah Stead, The New York Times,

... Read More >

Personal Finance For DummiesNow updated-the proven guide to taking control of your finances

The bestselling Personal Finance For Dummies has helped countless readers bu... Read More >

Wiley Pathways Personal FinanceWhether looking to create and adhere to a budget or trying to best utilize consumer credit and loans, Personal Finance will help readers make smart fi... Read More >

Personal FinanceThis market-leading text offers a student-friendly, practical introduction to managing personal finances. The structured pedagogy helps students learn... Read More >

HTML Version:

Text Version:

Article Url: