Wednesday, October 05, 2011

Principal reduction plan for struggling homeowners could be part of settlement between lenders and states

Principal reduction plan for struggling homeowners could be part of settlement between lenders and states
Florida homeowners facing foreclosure could see their debt reduced by banks under a proposal being negotiated this week by state attorneys general. In return for cutting loan balances, banks would pay less in penalties for foreclosure and mortgage-related wrongdoing. The principal reduction plan, which is being discussed as part of a settlement agreement between lenders and states, would accompany a second program that would provide funding to states to pay for their own foreclosure-rescue activity.
It's about time somebody took this approach seriously. How can the housing market recover with 25% of the nation's mortgages underwater?


Anonymous said...

"Underwater" mortgages should not be a basis for principal reduction. Mortgage lenders do not lend based on where market prices will go. That risk is assumed by the mortgager.

Anonymous said...

How can the housing market recover when 20% of it is burdened with the perpetual liens and perverse incentives that come with being part of an HOA?

Depending on which polls you believe and how you interpret those polls *, only 20% to 40% of home buyers are looking for that in their next home. That means that to some degree, 60% to 80% of potential home buyers do NOT want this "feature" that governments have been mandating for decades.

* I have to qualify that 20%-40% / 60%-80% figure, because it is amazing that I have found so little polling data about

(1) attitudes towards HOAs, and
(2) a measure of knowledge about HOAs

For example, how many people know that their HOA can foreclose for failure to pay a disputed fine or fee?

Or that _____% of foreclosures are by HOAs, not mortgage lenders?

How many people understand that their home is forever collateral to any debts and liabilities created by the HOA -- even after they have paid off the mortgage?

Or that the HOA board of directors can often change rules without approval of the homeowners?

Do home buyers know that while an individual homeowner can be fined without limit for a perceived "breech of contract," there is often no penalty for the HOA corporation when it violates the rules, or even the law. Which means that, for all practical purposes, homeowners have no recourse, because the transaction costs of enforcing their rights is so great they are hardly ever able to do it? ie, even if you successfully sue your HOA, all you may get is a ruling unless you can prove "damages". Whereas the HOA "contract" allows it to claim every fine and fee as "damages" from you.

Would such knowledge change the attitudes of poll respondents?

And if a poll respondent doesn't know these things, should their opinion carry the same weight as a poll respondent who does?