How To Solve The Foreclosure Crisis

1189 words - 5 pages

Due to the recession that our economy has recently experienced, American consumers are currently undertaking serious financial problems. Such difficulties are obvious in real estate, with homeowners having to deal with a major foreclosure crisis. According to studies by the Mortgage Bankers Association, one out of every 200 homes will eventually be foreclosed, and 250,000 families enter into foreclosure every three months. Although the worst times are still in our future, with help from the United States government, we as citizens will eventually overcome the horrendous situation of America’s current real estate market.
To combat our nation’s foreclosure crisis, I believe it is necessary ...view middle of the document...

In the event that the profits from the sold home cannot cover the mortgagee’s payments, the lender may file a deficiency judgment against them. “More than 6 in 10 homeowners delinquent in their mortgage payments are not aware of services that mortgage lenders can offer to individuals having trouble with their mortgage” (Freddie Mac), such as bankruptcy, appeals, a motion, or an exemption from the creditor. When a deficiency judgment is filed against a debtor, the individual should seek the assistance of an attorney as soon as possible. Deficiency judgments are rare, however, because a majority of lenders feel that if a borrower is not able to make their payments initially, there is no reason to spend their time and money on further legal action.
With the occurring realization that foreclosure is a losing proposition for both the lender and the borrower, negotiating a temporary delay in payments may benefit both parties. Contrary to the belief that contacting a lender for help is embarrassing, useless, and will cause the home to be lost more quickly (Freddie Mac), lenders are usually receptive to the idea of reconstructing a payment plan. According to Craig Focardi, research director of TowerGroup’s consumer lending division CMB, lender losses on foreclosure “range from 20 cents to 60 cents on the dollar. Lenders typically lose $50,000 or more on one foreclosure.” Common forms of forbearance include, but are not limited to: “skipping one payment (that is, letting the consumer remain ‘30 days down’), extending the grace period for making late payments, skipping two to six payments for a year or two, or accepting reduced payments from anywhere from one to eighteen months” (National Consumer Law Center). Although the borrower may be forced to pay a bit more than their mortgage is worth, the aforementioned repayment options are an excellent alternative to foreclosure.
The most basic way of avoiding the troubles of foreclosure, is to simply keep mortgage payments at a high priority; that is, compared to smaller, less important bills the homebuyer may owe. Missing payments on credit cards, doctor bills, cell phones, and other small debts to maintain your mortgage is a small sacrifice in order to keep your home. Many lenders offer reasonable repayment plans that will assist the borrower with paying back their loan, depending on their financial situation. Such a course of action dramatically helps, with low- and moderate-income borrowers on repayment plans being “68% less likely to lose their homes” [Dona Dezube, “Heroic Homeownership,” Mortgage Banking, (June 2006) p. 82].
If the self-discipline of a homebuyer is not enough motivation to retain mortgage payments, the government provides...

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