Mortgage foreclosures are once more grabbing the headlines but it is not all good news. The gist is that mega banks had tried to shortcut the foreclosure process and taken measures not allowed by the law. It was not just a couple of stray cases but had infiltrated into the entire mortgage system. The harried financial entities have now put on hold many of their foreclosures.
The immediate result will be that many delinquent borrowers would be able to stay in their houses for an indefinite period without paying mortgage dues.
This apart those buyers who had purchased foreclosed houses could be asked to defend their ownership titles against the borrower who had defaulted and foreclosed upon. The position of the lenders will not be any better – having lent money to persons to buy foreclosed houses whose titles now carry a huge question mark.
The legal expenses of this chain of actions could allow for more banks to collapse; this in turn could compel the federal government to dip into the taxpayer’s kitty and come forward with another round of help. Ultimately the bill would be footed by borrowers who were responsible and prudent lenders.
In this temporary chaos there is a silver lining – reducing evictions which in turn will bring back health to the localities. This could attract new buyers to pep up the housing sector with buyers hunting for clean titles. However it is wild imagination to think that the battered borrowers could be instrumental in generating a renaissance in real estate.
About $2 million has gone down the drain in the current mayhem. Postponing foreclosure will not bring back a dime. The losses will not go away whether foreclosures proceed or not. In fact the suspension of foreclosures will add to the losses. Maintenance standards will fast deteriorate as borrowers will have no longer term interest in caring for the units.
From the social angle the proper question would be not just about the number of foreclosures bungled but the changes in practices of business houses that have allowed the spawning of such massive fraud. There is no doubt that a good share of the responsibility rests with the banks. The securitization has caused the ownership to spread across the globe producing generous gains when there was stability in the market.
It permitted investors to diversify risk options. All the eggs were not in one basket – a single bank or region. But this was possible because the Federal Reserve allowed it to take place and thus it too cannot shake off responsibility.
Kevin Simpson is a consultant with experience in http://www.cheaphomeslistings.com/. With his knowledge in the real estate market, he provides information over the best investments in Iowa cheap homes listings for future owners and sellers
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