With all of the talk about the US Treasury bailing out the financial industry and now potentially the auto industry, everyone has seemed to forgotten the actual homeowners who are suffering from foreclosure. Simply stealing from Americans to paper over losses at large corporations does not address the disastrous monetary policy the government has been engaged in for years. But can we even expect that the government will really do anything to stop the rising tide of foreclosures?
The answer is that they can never save over twenty percent of all delinquent mortgage loans. The recent announcement that Fannie Mae and Freddie Mac will modify many more loans is little more than another good “sound bite" that looks good but means almost nothing. In fact, there is a much better chance the government will make the situation worse than it is right now, and then attempt to address its own problems with more of the same solutions later on. Does anyone else expect numerous future bailouts?
But for homeowners to qualify for the Fannie Mae and Freddie Mac programs, the loan can be no more than ninety percent of the home's present fair market value. Since values have dropped somewhere between twenty and forty percent from just two years ago, and those values were improperly inflated by at least ten percent or more in some areas, and most of these loans were ninety percent or more of supposed (inflated) value at the time made, the question begs to be asked: how many loans of this nature could possibly be helped? The answer is an amazing low figure of about 5 to 10 percent of the loans owned by Fannie and Freddie may qualify for a mortgage modification under these guidelines.
After the destruction of the subprime lending industry, the freezing up of credit for borrowers who were once desirable candidates for mortgages, and a foreclosure crisis that has dumped tens of thousands of homes onto already flooded markets, property values could do nothing else but decline sharply. Do you really think your loan is ninety percent of your home's present value after the market has been destroyed and home finance has dried up for all but the most credit-worthy buyers?
And even if your loan is eligible, then the Government Sponsored Enterprises will only reduce payments down to 38 percent of gross income. This is almost never enough of a reduction to make a lasting impact on a family's financial situation, especially in the case of a job loss or severe medical emergency. And finally, why would any homeowner even want to continue paying on a house that is declining in value, even if the payments are slightly less? The government's modification program is another ill-conceived plan coming on the heels of previous ill-conceived plans, and its eventual failure will result in more equally destructive bailouts and programs.
Many foreclosure assistance companies in the private sector have negotiated many, many loans with Fannie and Freddie, as well as all of the other large banks and mortgage servicing companies. And many of these properties have been much worse off than having a loan at ninety percent of the present value of the house. As well, they have also modified payments closer to twenty-five percent of gross income, thereby freeing up more of a family's income for more important uses after a financial hardship.
Nick writes articles to give advice to homeowners who are the in the process of stopping foreclosure on their properties and learning how to recover their finances afterward. His other articles describe various solutions to foreclosure, including modifying a loan, obtaining a foreclosure refinance, and even answering a foreclosure lawsuit to get more time from the courts to work out a long term plan. Visit his site today to read more about how foreclosure works and how you can stop the process: http://www.foreclosurefish.com/