Families Faced with Foreclosure - a newspaper headline and the topic of daily media reports in states across America.
It's true AND it's unfortunate - Foreclosures are up. Foreclosure is a personal tragedy for affected families. Foreclosure is a business failure for affected lenders and their investors. On the flip side, many millions of Americans who had an opportunity to buy a home at the peak of the market with a high-risk mortgage didn't do that, so we're in a position to bail out those who did. And state legislatures across the country are helping us do so, each in their own way.
Maryland's governor, in an effort to boost his record-low (and well-deserved) 33% approval rating, signed a bill yesterday to provide foreclosure relief by extending the foreclosure time-line from 15 days to 150 days. Several other foreclosure-relief bills are expected in the closing days of the legislative session, in addition to this. Great for consumers, not the affected lending institutions and investors - but Maryland isn't the most business-friendly state anyway, so what the heck.
Governor O'Malley pointed to "the people who unscrupulously try to prey upon the suffering and challenges of those who are economically vulnerable..." He went on to say "to lose even one home in our state is unacceptable..." I can't help wondering if well-intentioned legislation to protect consumers from the consequences of their decisions and events in their lives (and the evil lending industry) could have a cost of its own.
Is there any point at which lenders who can't protect their assets and their investors decide to take their money and go do business somewhere else?
As foreclosure relief bills pile up, at the expense of lenders and taxpayers, will some lenders just pack up their assets and move away? Five or ten years down the road, will the Maryland Legislature be offering incentives for lenders to please come back to Maryland and provide mortgages because no-one can buy or sell a home without one?
It occurs to me that we might throw out the baby with the bathwater, as the saying goes.
My question is this: While protecting consumers from unscrupulous lenders - a worthy goal - do we create obstacles for the good guys in the lending industry doing business in our state and, therefore, risk driving them out of Maryland? I hope our legislators (and law-makers around the country) consider this possible unintended consequence of ill-conceived legislation, and take care NOT to let this happen. As they struggle to come up with a short-term solution for todoay's foreclosure situation, they need to keep in mind the long-term effects of any legislation because, in the end, it's the golden rule - he who has the gold makes the rules.
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The Washington Post reports these legislative proposals in other states for addressing today's foreclosures:
Connecticut: Payment assistance (from taxpayers, of course) for at-risk homeowners; continued occupancy by tenants of foreclosed properties
Delaware: Protect consumers from mortgage rescue schemes.
D.C. Prohibit equity-stripping through unethical property transactions and protect financially distressed homeowners.
Florida: Extend foreclosure timetable to 110 days; prohibit "foreclosure-rescue consultants" from engaging in certain acts or failing to perform contracted services.
Massachusetts: Create a homeownership protection program and foreclosure preventing fund; subject mortgage fraud to criminal prosecution.
Michigan: Create a foreclosure prevention fund; provided assistance to distressed homeowners; prohibit foreclosure action against active-duty military personnel.
New York: Authorize state loans to homeowners acing foreclosure; provide free legal counsel to those undergoing foreclosure; strengthen regulations on businesses engaging in activities relating to home loan defaults and foreclosures.
Ohio: Prohibit foreclosure actions against active military personnel or veterans less than 18-months removed from service.
Virginia: Require people who advertise services to help owners avoid foreclosures to disclose the nature of their services and the owener's right to rescind a contract entered into with such person.
Just curious... as real estate and mortgage lending professionals, do you think any one of these State proposals stands out as "the best" solution for today's foreclosure situation?
FOR CONSUMERS:
How to Avoid Foreclosure in Crofton and Anne Arundel County Maryland - 01/29/08 10:25 AM |
| Maryland Home Sellers, New Relief for Short Sales - 12/21/07 11:23 AM Most Maryland home owners won't be affected by the new tax bill signed by President Bush yesterday, but anyone who purchased or refinanced their home in the past 2-3 years could be, if the loan balance is higher than today's selling price. That situation is known as a "short sale"... |
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Margaret, Even though I am a mortgage guy I think that foreclosure is too easy for lenders. I think they should have to jump through a few more hoops before they are able to initiate foreclosure procedures.
Protecting people's right to own their own home should be one of our highest priorities. In the "Olden Days" before trust deeds became legal and popular foreclosure was a drastic step. It was costly and time-consuming. Banks were forced to try to work things out first. It was only prudent.
Now with trust deeds the process is quick, easy, and inexpensive. In my opiniion it is too quick, too easy, and too inexpensive. Banks have always been heartless. But now we've made it too easy for them.
It is time to reign them in.
Bill Roberts
Margaret - What a fantastic post. This will sound heartless, but the state should not be in the business of subsidizing mortgage payments. I'm all for helping someone who has fallen on hard times, but that's not the role of the state; leave that to private charitable organizations. The 'consumer protection' aspect of some of these programs is admirable, but that should be a very limited role - i.e. prosecution of fraud, etc.
Many years ago Kathy and I took care of my great aunt for several years - we made the decision not to allow her to go to a nursing home so she could stay in her home until she passed. The nursing care cost us almost $3,000 a month... we struggled many times to pay that and our personal bills. Should our mortgage payments have been subsidized because money was tight? No. We cut corners to make sure our bills were always paid on time. As you said above, "you pay you stay; you don't, you won't."
It's Life, Liberty, and the pursuit of Happiness... Homeownership is not a constitutional right. It's up to John & Jane Homeowner to protect their 'right' to own a home. My .02 worth anyway.
Magaret, The issue is a fundamental one. People have a right to "own" their own home. In our "civilized" society we lose sight of this basic right. We treat people as impersonal statistics. We forget how it was in pre-civilized days when everybody owned their own place. They didn't pay rent to anybody. They had dignity.
Simon Legree is alive and well in the U.S. today.
Bill Roberts
Bill- Florida is a statutory warranty deed state. Lenders here do not give 'trust deeds'. In our state, with the proper defense you can stay in your house up to 24 months fending off foreclosure. That is a long time to stay and not pay.
Margaret- This is a post that should have a gold star on it but this is not what the public wants to hear. There is no more personal responsibility. It is not the governments job to provide housing or keep people from paying their obligations.
What about the people that care so deeply about their integrity that when their payment goes up on their ARM they go out and get a second and a third job to pay that note? No one talks about how hard life is for them who do pay. Only bail out those who don't. I read an amazing statistic the government came out with: The Asians have the lowest foreclosure and default rate of any other segment of our country. Now, if you study culture diversity and the things that make people who they are you will discover that they will work as many jobs as they have to, they get support from extended family and friends, they do not depend on government to bail them out. There is much to learn from this study the government did.
This is the land of opportunity, anyone can fall down, but they need to get back up again on their own two feet.
Private charities are here to help those that are down.
If you let government take away our money to do it, you are not fixing the problem.
You might as well enlist a marxist society. Have the government buy up all the homes and dole them out to the people but remember this socialist experiment was an utter failure!