Foreclosure Roulette

In a blog from The Huffington Post, Arthur Delany dissects the game of foreclosure roulette that hundreds of thousand of Americans are involuntarily playing with their lenders right now.

Once you’ve stopped paying your mortgage – and depending on the laws of the state in which the home is located – you’ve traditionally had between 4 and 10 months before the local sheriff is knocking at your door.

Not anymore.

As noted on radaronline.com, the average foreclosure now takes almost 16 months – meaning people are living mortgage/rent free for almost a year and a half. For many however, they’d prefer for that not to be the case.

From my experience, the overwhelming majority would like the security of coming home every day, without wondering if this will be the evening they pull into their driveway and find their belongings at the curb. For most, stability trumps rent-free living.

If the idea put forth in the article – that lenders are randomly foreclosing to prevent “widespread moral hazard” while leaving the rest so that losses aren’t recognized – is true, lenders are in for a rude awakening.

Few believe the housing crisis is behind us, so to assume that keeping homes that would have otherwise been foreclosed on the books in order to see them return to anywhere near their peak bubble prices, is a fantasy. Many markets are expecting prices to continue dropping over the next two years, while for most markets it could be decades before prices return to what they once were.

Working with people – whether it be long-term loan modifications, rent-to-own or sensible principle reductions, is the only way we’re going to get through this mess.

At a point, lenders are going to have to concede the true values of most homes are far below their peak-appraised value. Instead of playing this waiting game that is doomed to fail, work with people efficiently and help to keep them in their homes. Homeowners have some stability, neighborhoods will be full with maintainable property values and lenders will make far more than what they would otherwise receive, for a vacant listing competing with thousands of other vacant listings.

It’s better for the customer, it’s better for the community and in turn, it will be better for the lender.

And of course, when all else fails, have a streamlined short sale process in place!