Scarcity of jobs puts more at risk of foreclosure
"Ultimately, the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story," Jay Brinkmann, the Mortgage Bankers Association's top economist, said in a statement. "Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers."
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If things don't turn around relatively soon, I wonder if mortgage lenders will take a voluntary foreclosure holiday, figuring the costs of foreclosing and attempting to resell in a bad market simply aren't worth it. After all, foreclosure is based on the value (and marketability) of the property securing the amount of the loan. With home price deflation and so many out of work (and therefore unable to buy foreclosed homes), the quality of that security to remedy delinquent mortgage debt is called into question.
2 comments:
> foreclosure is based on the value (and marketability) of the property
> securing the amount of the loan. With home price deflation and so many
> out of work (and therefore unable to buy foreclosed homes), the quality
> of that security to remedy delinquent mortgage debt is called into question.
The libertarians have an answer to that -- make the borrower responsible for the full amount of the loan, even after foreclosure. (see here and scroll down through the comments)
Because in libertopia, all states should be recourse states, where lenders are protected if the value of the loan's collateral decreases.
But individual homeowners deserve no such protection if the value of the loan's collateral decreases. That's just the free market at work, and the government should not interfere.
Oh, the government found a solution to the individual homeowner's risk. It's called a homeowner association corporation or HOA corp. You see HOA corps preserve value. You can see how all over the country those HOA burdened homes have absolutely preserved value for the homeowners.
The homeowners also had to pay assessments so the HOA corp could perform its stated purpose. These fees went to HOA vendors like HOA management companies and insurance providers.
During the homeowners tenancy in their homes, they would be constantly receiving letters regarding fines and threatening foreclosure if they did not do as the HOA corp's management company commanded. The management companies are compensated for each letter that is sent out from the pool of collected assessments.
The management company and the HOA corp board of directors are protected from personal liability no matter how egregious their conduct because of the insurance policy sold by the management company and paid for from the pool of collected assessments. The management companies also utilize a portion of the pool of collected assessments (their client's funds) to lobby legislatures to enact laws giving them even greater powers over the homeowners.
This of course ensures that HOAs preserve property values - not. For years the industry ignored/hid the liability side of the balance sheet in order to prop up the ridiculous proposition that HOAs "preserve value". Now even the asset side by itself can't support the myth.
If a home is an "investment", then the HOA corps and advisors should bear financial liability to individual homeowners for the loss in "property value". They've already caused the homeowner to lose value in the use and enjoyment of the property as well as in the right to exclude others from the property. Homeowners paid a heavy price for industry false promises and the industry players and HOA corps should be liable for deceptive trade practices, fraud, and a host of other torts.
Proposal: if the homeowner is in a recourse state then the bank's recourse should be limited to pursuing the HOA corp when the security has lost so much value that it is insufficient to cover the note on HOA-burdened property.
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