Repo Houses

By repo houses are meant houses that have been repossessed by the banks after having foreclosed upon them. The numbers of repo houses are increasing with the figures touching millions.

The repo houses are mostly the residential units that fell prey to foreclosures. The sub-prime crisis is being blamed for the multiplication of repo houses. Those who were not eligible for prime or traditional loans were peddled these sub-prime mortgages that did not require income proof. Neither was it necessary for income to be proportionate to the value of the loan. As such practically anybody with a pulse could avail of these loans.

When these loans started pouring into the market the housing boom was on in full swing. There was huge demand for housing. As property prices rose so did the games of speculators who overnight bought and sold houses to make profit. The money coming from sub-prime mortgages played a pivotal role in the housing boom.

The borrowers either did not understand the implications of the loans or they were greedy to walk into palaces beyond their means. The basic thinking was that since property prices continued to increase the loan could be easily paid off. But the law of economics determined otherwise. When the interest rates began to increase thousands of borrowers defaulted. The banks suddenly found their flow of money coming from mortgage payments drying up.

The lenders began to foreclose on thousands of houses and take over the units as repo houses. But with the worth of property having fallen the houses were worth little. There were no buyers. One by one the banks began to collapse under the dead weight of repo houses.

The repo houses blight the locality. The situation is so serious that Flint City in Michigan has taken the first initiative in mowing down the houses and thereby shrinking the city. With banks being unable to maintain repo houses and people not having funds to buy them Flint authorities have woken up to the realities of a new age when Nature has to be returned what has been taken from her.

Meanwhile the government is taking innumerable measures to encourage people to purchase the repo houses. Local authorities are buying these repo houses, refurbishing them and selling them out to the middle and low income group in need of housing. The government is giving tax benefits to the purchasers while the lenders too will get cash incentives as will the servicers. But a grim unemployment picture is acting spoilt sport and negating all constructive plans.

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