Is This As Good As It’s Gonna Get?

Your Mortgage IS the Problem

I’ve witnessed something interesting about the current foreclosure crisis that I think is flying well under your radar.

In fact I think Washington has been working up the courage to finally admit to you that:

The Foreclosure Crisis has been Solved

Where have I gotten my information from?  The same place as you, except I’m reading between the lines.

Allow me to explain…

Checking for a Pulse

If we’re using the evening news as a barometer for the issues of the day, you would find the foreclosure crisis only discussed on slow news days.  When this happens it’s interpreted that the public has lost interest (or have they?).

During the 2008 elections, the foreclosure crisis was front and center on the campaign trail.  But as the campaign drew closer to Election Day, the Crisis on Wall Street began replacing the Crisis at The Front Door of homeowners facing foreclosure.

News outlets reporting the latest foreclosure statistics have changed in size and reach, broadcasting to smaller audiences through Blogs, Twitter feed updates and AM talk radio shows (occasionally).

In the beginning the story was carried by major media outlets including national television news broadcasts, the front pages of major daily newspapers and magazines, in addition to cable news channels punditry.

What a difference a crisis makes, as you’ll begin to see.

Redefining the Foreclosure Crisis

In 2008, the foreclosure crisis was re-defined as the Banking Crisis, with financial institutions receiving the media’s full, undivided attention.

With everyone worried about their money deposited in banks teetering on insolvency, a political solution was applied;

BANK BAILOUTS

In fairness, the current administration in Washington D.C. have made efforts to address the foreclosure crisis.  However, since assuming command and control of the nations economy, their efforts aren’t intended to address it as a foreclosure crisis entirely.

In fact, if you read any of the legislation that’s gone into effect since the foreclosure crisis began, it’s designed entirely to address bank liquidity and capital requirements for institutions to be considered solvent by FDIC and the Federal Reserve.

Let’s examine how the problem is framed by Print and Broadcast Media:

• Banks currently have Non Performing Assets on their balance sheet
• A Home Mortgage is a Non Performing Asset when a Borrower stops making payments
• Banks must get Non Performing Assets off their balance sheet to raise Capital in order to make loans and extend credit to eligible borrowers (i.e., U.S. Treasury, Corporations,  State Governments…AND THEN to small and medium size businesses.
• Banks will see their capital increase IMMEDIATELY on their balance sheet the moment they can transfer Loan Loss Reserves (which total in the Billions of dollars) to Investment Capital accounts.

So, as you can see, your mortgage IS the problem.

Where’s the Proof?

At the beginning of the foreclosure crisis, banks were reluctant to permit home owners in default to sell their property for less than what was owed.

However, what a difference a year and a few high profile bank failures and FDIC seizures can make as Lenders are more open to Short Sales.

The Obama Administration also made it’s priorities known when it failed to support important Bankruptcy legislation in Congress that would have allowed home owners in foreclosure to seek Bankruptcy Court Protection.

The proposed legislation would give a Bankruptcy Court Judge the authority to restructure a homeowners mortgage (principal, interest rate and term of loan), and allow homeowners currently owing more than their property is worth a chance to save their homes from foreclosure.

The legislation never made it out the Senate Banking Committee after being defeated in a procedural hurdle that faced threats of a filibuster.

Need more proof?

The Obama Administration is now developing a short sale program that would pay homeowners facing foreclosure to sell their homes.

Under the new program, Lenders will continue to receive $1,000 for granting a short sale.

The homeowner would receive a one time $1,500 “Relocation Fee”.

Prior to what’s being proposed, homeowners weren’t eligible to receive any proceeds from a sale when their property was sold for less than what was owed on the existing mortgage.

with Lenders motivated to approve short sales, homeowners agreeing to the sale of their home in return for the relocation fee will shorten the foreclosure process.

And that benefits Lenders tremendously.

Is that good enough for you?

One can hardly believe that a $1,500 relocation fee is fair to families facing foreclosure in return for their cooperation.

How do you weigh the loss of their down payment, home improvements made and ongoing care and maintenance costs incurred?

What about the emotional costs to families forced to leave schools, churches and neighborhood organizations they’ve been a part of since becoming a member of the community?

Is this good enough?