Thursday, March 26, 2009

Foreclosure Flood

As appeared in the T&G March 2008 AD

To Whom It May Concern and It Should Concern All Americans.
I have been a licensed Massachusetts Real Estate Broker for nearly a quarter of a century and have seen the industry evolve. Every upward and downward market spiral has a rational explanation for its occurrence (especially after the fact!) However, I have never experienced a market quite like this one. Although a correction was anticipated no one perceived its potential severity. Because we are a global economy this condition has had worldwide consequences.
Real Estate, like any commodity fluctuates with supply and demand, a basic economic principle, but its impact on the entire economy is now evident. Presently, we have an abundance of properties on the market, largely due to the sub prime fallout but also due to jobs being lost or out sourced to foreign countries, the increasing cost of food and health care and the horrendous prices of home heating fuel and gasoline which renders borrowers unable to make their mortgage payments.
In December 2007, I e-mailed the Governor’s Office with what I considered to be a reasonable, fairly simple and most importantly rapid resolution to the “foreclosure flood”. I followed up with several phone calls which were not returned. Nor was my e-mail even acknowledged in any form. Let me tell you if I did not return phone calls or e-mails I would be out of business! In February 2008 my call was returned and I was informed that the Housing Secretary was exploring all available options. I have yet to hear any version of my plan suggested by any bureaucrat.*
At any rate, here is my suggestion to tunicate the hemorrhaging! I think it is a Win-Win proposal. The borrowers get to keep their homes and the lenders get the full amount of their investment back. And, people who have to sell their homes for whatever reason, job relocation, economic or personal factors would not have to compete with as many bank owned homes thus fostering stabilization of prices. Both lenders and borrowers must take responsibility for their decisions and taxpayers who are already overburdened by correcting choices others may have made should not be forced to pay for these mistakes.
Many borrowers did not due their “Homework” regarding mortgages. They initially took loans at a discounted rate in order to purchase a property. Now that the rate has adjusted upward, they can no longer make their monthly payment.
Certain lenders can not be held harmless either. Sadly, there are several predatory companies that prey on the less informed public.
Here is my solution if refinancing is not an option: Do not re-write the original note just change the terms. If a borrower can still make the initial monthly payment but not the increased adjustment, extend the term of the note to the number of years that would equate to the total pay back to the lender, a simple mathematical equation. Even if the note had to be extended to a term of 40-50 years or more to allow the borrower to continue to make payments that they could afford would enable the borrower/homeowner to keep their home and credit rating so that when their circumstances change, they can either sell in a better market or refinance their note. This would also not require a new appraisal and could be done between the original lender/ servicer and borrower involving only the parties responsible for their actions. Since so many people financed 100% of their mortgage and now their homes are not worth what they initially paid for them this would not become an issue as the lender who originally issued the note would have to take on the risk that they were so eager to do in the first place. Again, placing the responsibility duly on the parties that are involved and not the taxpayer. Obviously, this won’t work for everyone but I believe it would work for enough people to make a difference and help restore consumer confidence which is so desperately needed at this time.

Sue Meola, GRI, CBR, LMC
West Boylston, MA

* It is unfortunate that this idea was sent to the Governor’s Office in 2007 and there was no response from government. I then approached Rep. Jim McGovern who informed me of a public gathering in Marlboro in September 2008 at which Rep. Barney Frank was unveiling his “mortgage solution”. I repeatedly and vehemently conveyed my idea to Rep. Frank and it was summarily and condescendingly dismissed…and what is Congress doing now?…exactly what I suggested in December 2007! Think of the homeowner’s that could have been rescued and what a different housing market we might be experiencing today if only politicians listened to the people whom they profess to represent! UP NEXT: Government’s reward of BAD Behavior

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