Have you noticed the shift in the everyone’s language over the past few months?
It doesn’t matter if you’re listening to President Obama, the Treasury Secretary, members of Congress, the news media, or even your lender. They’ve all started talking about saving homeowners from foreclosure rather than keeping homeowners in their homes.
It’s a major shift that I mentioned in HAMP Switches Gears…Away from Mods to “Avoiding Foreclosure,” but I wanted to expand on it a little today because it’ seems to be picking up speed.
And it’s an important shift…important for you.
Why The Change?
So why is the language changing? Quite simply, because reality has settled in and people have moved away from trying to do what feels good to doing what makes financial sense.
After a year of the HAMP program, most people agree it’s a failure and needs to be redone. I examined many of the reasons a couple days ago in 7 Fatal HAMP Flaws – Why Servicers Won’t Modify Your Mortgage.
We can discuss all day about whose fault it is and what “should” be done to fix it and who should wind up taking it in the shorts. But the fact is that many modifications simply won’t work without lenders losing serious money. Which means they’re not going to do them.
Right or wrong, that’s where we stand. And the government isn’t about to tell the banking industry they have to accept the losses any time soon. If they did, they banks would simply shut their doors and the great financial collapse of the US would ensue.
I know that might be a little melodramatic, but it’s not far from the truth.
What’s It Mean for You and Your Home?
It means that if you don’t have money to pay for your house, you’re probably going to lose it.
Now…that may come as a result of a short sale or a deed in lieu rather than a foreclosure, but the end result to you and your family is the same…you’ll be moving.
If you don’t have the money now, but you will in a few months because you were laid off or had some extraordinary one-time expenses, there’s a good chance you’ll be able to stay in your home.
If you have the money to pay your mortgage but are hoping for a reduction in your payments, there’s a fair chance it could happen and there may be programs on the way to help you.
If you’re upside down on your loan, it’s unlikely the bank is going to modify your loan. And the more upside down you are, the less likely this becomes in my opinion. I honestly don’t understand the math on why banks would lose more by modifying the principal balance of your loan than they would by foreclosing and selling it to someone else at around the same price, but that’s what they say…
My Opinion…For What It’s Worth
The bottom line of the whole crisis is that greed got us where we are. I wrote about this in: Are banks too greedy? And it wasn’t just the bank’s greed (although that was a significant factor). It was also the politician’s greed for votes and making sure everyone ‘owned’ a home. And the Treasury Department’s greed to keep interest rates low and keep the economy artificially inflated (as it still is). And, finally, our greed as homebuyers (or should I say prospectors) is partly to blame.
And it seems like it’s the people that are gonna have to take it in the shorts the most before the crisis ends. Not only are we losing our homes in record numbers, but many are losing their jobs as well because of the economy.
But that’s the system we live in in America. It’s called capitalism and market-based economy. It’s unfortunate and sad, but there really is no fix except time and the hope we’ll learn from our mistakes…all of us.
Tags: Home Affordable Foreclosure Alternatives, Home Affordable Modification, lenders, opinion
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