Dec 05 2007
Thanks Uncle Sam, maybe
Properties all over the US are going into foreclosures. This is no surprise as loans that never should have been approved are rising to their indexed levels. Back in 2005, you needed only to be breathing to get a loan. Banks were falling over themselves in approving loans so they 
could collect fat closing fees. It does not take a genius to figure out that if you bring out loan programs such as stated income and stated assets, some people are going to inflate those numbers to get a loan. Investors rushed out to buy these loans for their portfolios. It never occured to them that quite a few of those loans would default. Investors knew exactly the terms under which those loans were made when they bought these loans. Now all the parties involved are playing the blame game. Homeowners are blaming the banks or mortgage bankers for not disclosing all the terms of their loans. Didn’t they sign loan documents? Weren’t all the terms spelled out in those documents with the important features most likely in bold letters?
The government has stepped in to stem the rise in expected foreclosures. The plan is to put a moratorium on increases in subprime loans for a period of 5 years. Not everyone can take advantage of this proposal. It’s only for those that will not be able to afford the higher monthly payments when their loan rates adjust upward. It will not be for those that have gotten behind on their mortgage payments. The loans must have been funded between January 2005 and July 2007. If you read this accord closely, you will find that a majority of homeowners will not be able to qualify.
As I see it, this is just a stopgap measure. It is not binding on the lending industry so homeowners will have to negotiate with their lender. There is no guarantee the lender will agree to a settlement. It would have been better to let the market settle by itself. Everyone involved is hoping that by buying time, real estate will rise again. This is not certain and we may be in for another round of foreclosures in five years.
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