Foreclosure Crisis…Let It Ride?

Posted on July 11, 2011

Many people believe that in order to get through the foreclosure crisis we have to let the market do its job. But will the market do its job or is the market the one that created the current crisis?

Quick Simplified Breakdown

In the beginning

  • People lied on their applications
  • Lenders approved too high of loan amounts
  • Realtors pushed sales

Causing

  • The homeownership rate to go up
  • The market prices on houses soared
  • Crashing Market
  • House loans to be “upside down”
  • Defaults
  • Loss of Jobs

The Current Problem

While it appears to be our current economy if one looks a little more you realize that in reality the underlying cause is currently that most home loans are “upside down” or have negative equity. In a normal market, if you get sick or lose your job and cannot make your mortgage payments you sell your house. Right now, if that happens, no one wants to buy the house and you are stuck in a foreclosure.

How to fix the crisis?

Most people think the market will correct itself over time. Which is likely true but it will definitely take some time. Although, if the initial problem that created the crisis isn’t fixed we could see this happen again.

Some people thing that the foreclosures should be pushed through quickly and get the crisis over quickly. But with the real issue being the negative equity and the economy, pushing through the foreclosures may actually slow down the process by flooding the housing market with too many low priced houses and push the market lower thus making it even harder to sell a house if an emergency happens.

Is there an answer right now other than to just let the market fix itself? Currently, no. The government has created plans (HAMP) to try and help the market along. But those plans are helping considerably lower amounts of people than hoped.

If you would like to learn more and/or receive assistance with foreclosure, loan modification, bankruptcy or debt settlement, please contact us at (857) 244-1940 or fill out the form on the right.

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