Why the 'foreclosures are bad for everyone' argument is bogus

I agree to a point but I live and work (in law enforcement) in a city that has been ravaged by foreclosures, many of which were investment properties. It is not homeowners put on the street by the marshals but their tenants, many of whom had paid their rents on time and didn't know what was going on til the eviction notice was on the door.

The plague of vacant houses has led to a corresponding increase in crime as houses have been plundered for their scrap materials including plumbing and siding, air conditioners stolen and mangled for their condensors, and in some cases, every scrap of wiring removed. Not to mention any remaining appliances, doors, trim etc. Homeless people and drug addicts have been squatting in vacant houses. All of which made these houses even less appealing for the next buyer as a large amount of work will have to be done to re-rehab them and the criminal element has become more entrenched in the surrounding neighborhood.

I'm not planning to sell any time soon, and my neighborhood is better off than many in the city but the vacant houses surrounding me mean that my sense of safety in my home and my overall quality of life keeps slipping, even as I make the commitment to stay put in the neighborhood I've chosen to make my home. Those houses don't hold neighbors who are keeping an eye on my place when I'm not home; instead they are a lure to scavengers and thieves who may move onto my house when they finish with the empty ones.

I'm not in favor of rewarding people who make bad financial decisions but many of the people struggling were deceived, enticed and at times even talked out of more prudent mortage products by salespeople. Others did everything right to the best of their ability but the downturn has eroded them to the breaking point. The people who were just outright scammers and complete idiots doing no money down/no proof of income mortgages are already gone--those are the houses already standing empty.

We have already thrown gobs of money at people at the top of the food chain who 1) made cosmically bad decisions that have seriously endangered the economic well being of all of us who have been more careful and prudent and 2) had a lot more personal cushions of money to get them through this hard time. We've been catering to the people at the top for years now in both tax breaks, incentives and protection of and from regulation--and look where we are. Maybe some attention to that fabled struggling working/middle class might pay some different dividends.

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Could you please tell that to my bank that has told me that my home equity line of credit is now less. Not that I was planning on using it but that's now less of an emergency line that I can go to.

Face it we as an economy are tied to our home values and property values going down is as bad as the stock market going down.

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Interesting piece. You might be interested in a related piece I wrote entitled Obama's Fuzzy Housing Numbers that appears on The Weekly Standard website. Here is the URL:

http://www.weeklystandard.com/weblogs/TWSFP/2009/02/obamas_fuzzy_housing_numbers_1.asp

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GOOD THINKING BRAIN TRUST...SOMETHING AKIN TO WITH HOLDING YOUR TAXES TO PAY FOR A FIRE DEPARTMENT UNTIL YOUR HOUSE CATCHS ON FIRE...

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my sense of the bottom line is that the lack of a strong job market, manufacturing, and high paid job growth in the US is behind most of the mortgage payment problems.
Obama had better focus on a long term industrial strategy for the future if he wants to improve this on his watch.

1 - if a homeowner has a job they can usually pay for a home. it may be a reasonably priced home, but it is a home.

2 - if a homeowner has no other job than to flip homes, the home market is more a mine field than a help at present.

many of the homes in distress in our area were part of the home investment as speculation, not home ownership for a family or an individual the last few years.

the US has the capacity to overproduce. and fueled by corrupt lending policy, that is where the money went. the most recent multi-years surge in home construction in the boom regions has the flavor of a bubble in values, rather than an asset to live in.

banks should have known if they were honest that what a home sells for is not the same as what it is worth.

when those cards fall, the rest (financial derivatives, CDOs, etc.) fall even quicker.

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There is a solution to stop foreclosure in it track.

I recently had a neighbor who had an adjustable rate mortgage that increased so much, so could not afford the payment. Foreclosures are life changing event for anyone, especially when she has kids. As a neighborhood we got together and researched a solution that would keep her and her family in the house. One of the guys in our neighborhood came across a loan modification called "Federal Modified Loans Program" She found a company offering this program and they saved her home. Selfishly, we were not only happy for her but re leaved our property values would not be threatened by a foreclosure.

I came across some facts that I didn't know. I'll pass them along

Listed below are some additional facts explaining why mortgage lenders are in favor of working with borrowers,

• All or a portion of the outstanding principal balance, past due mortgage payments, late fees, and lender costs may be rolled into the loan modification. This results in no lost revenue to the lender. Simply put, the amortization of the loan may be increased resulting in a lower monthly payment for the home owner at no loss to the mortgage company.

• Modified home loans use many repayment options to create a win win situation. In most cases, the mortgage lender will lower the interest rate and modify the variable term into a 30 or 40 year fixed mortgage. The lower monthly payments help ensure repayment by the borrower and create more interest earned by the lender over the life of the loan.

• Foreclosed homes are a hindrance on the lender as well as the borrower. When a bank forecloses on a home they are almost always guaranteed to loose money on the deal. Mortgage lenders have to pay real estate agents to list the home as well as any repairs required to make the home sale ready. Usually the home is listed at a discounted price, therefore causing the bank to loose money on the transaction. Add the slowing housing market to the equation and a loan modification seems a much more attractive financial solution for any lender.

• A modified loan accompanied with on-time payments positively affect the credit rating of a borrower resulting in less default within a banks mortgage portfolio. This is a benefit to the lender, speaking in bank terms.

I found this info at http://federalmodifiedloans.com/

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