Nobody is happy about a real estate foreclosure. The home owner is distressed and the lender is feeling the pain of soon owning a home they don't want. Real estate brokers, investors and ordinary home buyers are shaking their fists in frustration.
In theory the whole foreclosure mess can be quickly concluded through short sales. A short sale is when someone is willing to buy the home facing foreclosure for less than is still owed on the mortgage. The lender has to agree to that.
Here's the rub. With the country drowning in foreclosures the lender's loss mitigation people (the department that handles short sales) are buried in paper work. Even if you are a buyer willing and able to buy the home you can't get a response from the lender concerning a short sale.
Many people lose their homes and have their credit destroyed because of a lender's inability to handle the work load.
To be fair, mortgage lenders have been hard hit by the crisis in real estate. They've been forced to lay off workers to stay solvent. But...
Home owners have always been advised that if they are having trouble making their mortgage payments they should quickly contact their lender for help. Well, they call and call hoping to have some adjustments made in their mortgage loan so they can weather their period of financial problems.
The home owners are still working; they can still make payments on the mortgage if the interest rate or terms of the loan are adjusted. Lenders are so slow in seriously responding to these cries for help that the home is often lost in foreclosure before anything can be worked out.
Your government has been hearing from these frustrated home owners, so of course they feel they must at least look like they are doing something. That "something" is the Hope Now alliance, a Bush administration-backed industry group, who will set guidelines for mortgage companies participating in the effort to keep people in their homes.
The core of the action is an agreement designed to clarify the mortgage assistance process for borrowers and the industry alike... but it is not legally binding and not all lenders are members. Like so much from government it is something you could call "lip service". It's an action to cover their fannies, so they can say they are "doing something".
Predictably consumer groups have now jumped in saying Hope Now's efforts will never match the growth in foreclosures around the country, and are pushing for a new $300 billion program to allow the government to back new loans for struggling homeowners.
I don't think they mentioned the fact that that $300 billion will be paid by tax payers... the same people who are being foreclosed out of their homes.
It gets even funnier! Statistics released by Hope Now showed that nearly 183,000 borrowers received some form of loan workout in April, 2008. That sounds good, because if true, it is the highest monthly number since the effort started.
Then a federal bank regulator spoke up and questioned the accuracy of the trade groups' mortgage assistance data. The regulator, Comptroller of the Currency John Dugan called them "responses to surveys that produced aggregate, unverified results from individual firms."
I don't know what that means, but I don't think it's good.
So what's the answer? The economy rolls through cycles. There will be some winners and there will be some losers and then we will start all over again. And nothing the government does will matter one tiny, little bit.
