Is it time for a moratorium on foreclosures? It’s an idea that rears up from time to time, and there are plenty of opinions on both sides of the debate.
And although I believe that a total moratorium on foreclosures would have a very positive short-term effect, I believe that the long-term effect would be disastrous.
Allowing the problem to fester will not make it go away. How much better to treat the root cause of the disease than it is to deal with the pathology of failure?
Unfortunately, the issues are complex and every borrower’s situation is different. A lot of people CAN’T pay anymore, and there are others that WON”T pay. There are as many victims of circumstances as there are those trying to profit from the debacle.
And who is to say which one is the former of the latter?
But at the end of the day, there has to be a clear understanding that debts need to be repaid. It’s a simplistic principle but it goes to the very core of our mortgage system.
If there is no expectation of repayment, no investor will consider mortgages as a viable equity.
Like it or not, our societal view of obligation v. option has dramatically changed. And it is NOT a good thing.
Short-term fixes are not the answer,
It’s time to make the hard decisions to protect the future of home ownership in America.
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I agree that a moratorium would not be a good long-term answer. However, in the short term it might stabilize many markets where inventories are too high to recover in the short term. A blanket moratorium may not be the solution but if someone is paying some of their mortgage, perhaps giving them and the market a year to catch up would be good.
If you stay off foreclosures it will fester like a dam holding the water - once you do need to let out the water it will gush unless extreme control/restraint is applied to the process. I think the solution is to implement changes on the front end - get to the owner before the foreclosure is finalized. Educate to what can be done to work outs with the seller when possible and try to do better at the fix of the hole in the dam before the gusher begins. And of course, the clean up of the lending institutions on doing better on the short sale process that is often painful and full of bad decisions from the institutions ... that is another post!
Just as retailers factor shrinkage into their pricing, lenders have always factored their risk into home loans. With an increased propensity for loans to fail will come an increase in the price of loans. Preventing lenders from making the best economic decisions possible for maximum recovery of a bad debt will increase the cost of borrowing for everyone. Increased costs equate to less demand for product, both loans and housing.
New Jersey had a moratorium for several months and people just left their home. So there's a backlog and many vacant homes that are not even on the market yet. The situation won't improve, IMHO, until we see increased employment opportunities.
I agree with Connie, you have to let the river flow to stabilize the market. Virginia current had a moratorium during holidays...can't wait to see the effect in Feb. and spring market.
It angers me that many folks just think they don't need to pay, it is always someone elses fault why they fell behind, etc....grrrr
Let the chips fall as they may. we are seeing an improvement in many areas of the country so why mess with it. It hasn'tworked inthe past so why do int again!
I have yet to get used to the mindset that it's okay to just walk away when you can still afford to fulfill your mortgage obligation -- or any obligation for that matter. Disgraceful behavior, in my opinion.
If the lenders would work with us through the short sale process their losses would be reduced dramatically.Their wouldn't be a need for a moratorium as the number of foreclosures would drop and the market will adjust and stabilize.
Richard,
I've heard many experts say to stop all the programs and let foreclosures and short sales play out. Only then, can the industry begin to heal itself.
Rich
Richard I do agree that it may have a short term positive effect. And I also agree that it is likely to have a long term negative effect. The unfortunate problem is that folks need to save more and spend less. This goes in the face of our consumer economy. Until folks deal with that, there will be problems.
Cal
Im with Rich #10. Every time we introduce a new program to "fix the crisis" we only delay the inevitable. Just let it roll out.
It drives me crazy when I hear about people who just "won't" pay , not because they can't, but because they don't have to. Their house isn't worth market value anymore and they don't care if the bank comes and takes it. It'll take them a year at least, if not more. agrrrrr, it's going to take awhile to straighten this all out, but it needs to process through.