We all know that thousands of people are losing their houses, and while many already have lost them an even bigger housing problem exists that really hasn't been addressed. What do you do if your house is worth less than the loan you have on it, and you are still making your payments on time? First of all you are not guaranteed a profit when you make a purchase of any asset in this country, even government issued assets. On the other hand, the government has moved to stop foreclosures and to modify loans for those who have found themselves on the precipice of the foreclosure mountain. There appears to be a conflict of epic proportions.
Lenders have been encouraged to work with those homeowners who are demonstrating, through late payments or no payments at all, they cannot continue to stay in their own house. I am in favor of anything a lender can do to help those in this situation, but what about those who are still able to make their payments and are realistically in the same condition as those who aren't making their payments? Many people have said to me that they haven't any equity left in their house and now cannot make the payments. If there was some equity left would they find a way to make the payments? I wonder.
People do not want to have to miss payments to get the lender's attention, but on the other hand lenders cannot simply help everyone in the non equity position or they will not be able to stay in business. Is there a happy medium? If you ignore the problem it results in more and more innocent homeowners being hurt by foreclosures and are therefore exacerbating the problem. When the majority of the sales in an area are foreclosure sales, every homeowner in that area is being affected as their home is decreasing in value, at least temporarily.
Allow me to follow the trail a bit further. In our country lenders sell the loans they make to investors which gives us the capital to expand the housing market. When a loan goes bad the investors are the ones that end up losing the money. When the bank modifies a loan, the investors get less return. Who are the investors? In many cases they are us, through our investments in retirement plans of all kinds. Do we want to see our retirement funds decrease? I think finally a question is raised that I can easily answer. That answer is a resounding no!
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.