Will Foreclosure Victims Find Any Help From Lenders?

Posted on October 18th, 2007 by saman

There has been a great deal of discussion in both the political arena and the financial community about lenders taking some firm steps to help victims of the sub prime mortgage foreclosure mess. So far, that’s all there has been—Discussion! In the meantime, the foreclosure rates in the United States continue to escalate to the point that not just individual homeowners, but entire communities, are feeling the pinch. Moreover, some experts are concerned that this may lead to a recession despite any federal efforts to prevent it. The government continues to assure the nation that our economy has never been healthier than it is right now.

Critics of any real help fear that it will become a ‘bail out’ for individuals that should have known better to begin with. And it’s hard to argue with the fact that many homeowners could not have qualified for a standard fixed-rate mortgage due to low credit scores and absent cash for downpayments. They stuck their necks out for a piece of “the American dream” of home ownership only to see it go up in a puff of smoke when their adjustable rate mortgages escalated to the point where monthly payments increased by as much as 100-percent.

There are those as well who were truly victims of unscrupulous lenders who took it upon themselves to ‘fudge the facts’ in loan applications so that deals could be closed. More than a few of these lenders are now in Bankruptcy or on the verge of being so. They knew all too well that many applicants were not qualified but convinced them to go forward anyhow. The real irony, here, is that a sizeable percentage of sub prime loan applicants could have qualified for standard mortgages, but were convinced to take the alternative route.

According to a data base maintained by RealtyTrac, foreclosure filings including noices of default, aucion sales and bank repossessions soard upward to almost 244,000 in August, 2007, a 36% increase from September’s figures and a 100% increase over August.

There has been some help for individual homeowners facing foreclosure, but on a case-by-case basis. A few community groups have stepped up and actually prevented several thousand foreclosures by working with homeowners and their lenders. In addition, several large U.S. banks have agreed to work together to develop real solutions, but these are still some distance down the road and too late for many.

Finally, the Department of Banking is issuing new policies to deter future fraudulent lending practices and recommending the study of issues in order to stem the tide of residential mortgage forclosures. On the bottom line, it seems that some help will be available—eventually!