Battling the Next Foreclosure Assault

Posted on October 20, 2008
Filed Under Foreclosure Homes |

The government has bailed out Wall Street but that does not mean one can sit back. It is time to be prepared to battle the next foreclosure assault.

The main problem is the continuing decline in the house prices. This means an increasing number of borrowers are going underwater or holding on to impaired mortgages. Loans have now become bigger than what their houses are worth in the current market. The borrowers did not intentionally do anything wrong – they just bought houses during the peak of the housing boom. Now there is nothing to give them the incentive to fight for their houses and save the loan. Some borrowers did take ‘liar loans’ and others knowingly walked into houses they knew very well was beyond their affordable limits. Many are clinging on while the majority is suffering foreclosures.

Some estimates show that one out of every six house mortgage holder is in trouble. This has led to a socio-economic problem. Since the crisis began the financial institutions of the world have written down about $5000 billion securities that had been backed by mortgages. If something is not done to stop the tide of foreclosures, these institutions are likely to write off another $1 trillion to $1.5 trillion. In short – nothing substantial has been done as yet.

This is not the time to raise the moral issue that those who did wrong things should now pay for it. The housing crisis must not be allowed to repeat itself. As a result of this foreclosure drama an entire generation is going to become allergic to debts. This was how the people reacted during the time of the Great Depression.

The question of justice comes up. The government saved many but looked the other way when it came for the turn of help to be extended to Lehman Brothers. This was a great mistake. The house owners are paying more for this crisis than Wall Street. A wave of anger and frustration is rising that is going to take on political colours. Many Americans did not behave foolishly or greedily during the housing bubble. They are resenting the fact that the government is now pampering those who did. When housing prices fall then those not in foreclosure also suffer for no fault of theirs. Foreclosures are damaging the value of property everywhere and not merely those houses that have been repossessed upon.

If the government does not act judiciously then the entire economy will suffer – not merely the housing or financial market.