The Foreclosure Crisis That Will Not Go Away

A great column appeared in The Huffington Post by David Coates, discussing the ongoing foreclosure crisis and what isn’t being done to fix it.

Two excellent points worth noting:

1) We’re past the point where those in need of assistance are the reason for our real estate woes - i.e., they borrowed more than they could afford, etc. We now need new policies that assist those who are casualties of the real estate crisis, not causes of it.

I’ve long been a proponent of principle reductions – they give those struggling with payments a legitimate chance to keep their home and they give those who view their home as an investment gone bad a reason to stay.

2) By making it more difficult to get a mortgage, the growing inventory of available homes will take decades to shrink down due to the lack of demand.

Yes, unemployment may continue to be the main culprit for slow home sales, but tighter lending practices are equally responsible. Certainly, we can’t go back to providing $500k mortgages to people who make $30k a year, but we can begin making sensible, responsible loans again…

No Shame in a Short Sale

It’s not uncommon for people to tell me they feel bad about doing a short sale – that they have an obligation to their lender and feel like by doing a short sale they aren’t honoring their commitment.

While this is a noble sentiment – as I’ve written here many times before – it’s a very one-sided sentiment.

CNBC reports on the findings of US Treasury Departments Kenneth Feinberg, who listed 17 companies that took TARP money, then turned around and made what he labels “ill-advised payments” to employees. More times than not, those ill advised payments were in the form of CEO bonuses. Most, undeserved.

That some of those CEO’s were then quick to turn around and lecture their customers about the “social and moral” responsibility of continuing to make payments reeks of hypocrisy.

While I won’t disagree that when you take out a mortgage, you’ve entered into an agreement and you should do your best to honor it, the realities of today’s market often don’t allow for that.

So do a short sale. Attempt a loan mod. And if you bank is one of the 17 on this list, do so without an ounce of remorse…