Banks Are Making the Foreclosure Crisis Murkier

Posted on March 3, 2009
Filed Under Foreclosure Homes | 3 Comments

The banks are making the foreclosure crisis murkier and preventing the efforts being made to stop people from being evicted from their houses and homes.

The wave of toxic mortgages kicked off the current financial crisis and brought along with it waves of foreclosures. Unless this tide is stemmed even the most jumbo federal spending will not be able to bring about an economic revival.

The Obama team is poised to release $50 billion to help the foreclosure victims. But the foreclosure figures are staggering. Since 2006 about 1 million residences have slipped into foreclosure. It is expected that the next four years will experience 5.9 million foreclosures. Thus no matter what plans Obama has in mind, it will be insufficient to tackle the problem by itself. The lender and banking group has to accept huge losses apart from squeezing their brains to find out how the borrower can continue to make some sort of monthly payments towards the home mortgage.

As yet the banks have not shown any signs that they are even remotely thinking along these lines. One of the primary reasons for foreclosures continuing to hold sway on the economy is that the banks and their advisers in the federal government have delayed, made weak and hindered all plans to solve the problem. The lobbyists from the lending group continue to do so. They are trying to tone down the mood of the Obama package by not allowing bankruptcy judges the right to make alterations in mortgage terms. They are introducing various clauses and points to make it as ineffective in reality as possible.

The banking group has been trying right through to buy time and ward off regulation. One business advocate, speaking to BusinessWeek Said, “We were like the Dutch boy with his finger in the dike”. Like many of his colleagues the speaker wished to remain unidentified. He is afraid that his career might be damaged. Many agree upon thinking back that the big banks like Bank of Ameica, Citigorup and JPMorgan Chase would have done a prudent thing to address systematically the foreclosure problem two years previously. Instead unrealistically they kept on hoping that the housing sector would rebound.

Publicly the banks say that they have done their best to stop foreclosures. If they allow more power to bankruptcy judges then irresponsible borrowers would get encouraged. Ultimately it would lead to higher lending costs.

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