Foreclosure crisis retreats, but there are signs of increase

There are weak signs that the foreclosure crisis is retreating. The number has fallen again last November marking a trend that has been continuing for the last four months. The banks are appearing to be more amenable by putting in more effort to modify mortgages.

But tucked away in some corners bombs are ticking threatening to reverse the improvement – unemployment and a huge number of ARMs poised to increase their interest rates. It is still uncertain how much the banks will do voluntarily and for this the legislators are expected to be alert and do their bit to enforce order.

Philadelphia has resorted to a new strategy that is well worth copying. The city has stipulated that prior to foreclosure steps being taken there must be a face to face meeting between the lender and the borrower. It sounds simple and doubts may arise about its efficacy.

But since it took off in 2008 the plan has prevented 2,000 houses from falling into foreclosure. Another 3,000 are being handled. Apparently foreclosure is difficult when the issue is about real families being evicted from their hearth and homes.

The strategy has involved the help of non-profit groups and volunteering legal personnel as well as counselors. The programme is also advertising itself across the televisions. Door to door campaigns are also being conducted while the hot lines are being managed by legal pundits. It has been so successful that the USA Conference of Mayors has lauded it. Many other cities are following suit and the federal government is thinking about giving it a serious look.

Foreclosures have the potentiality of harming every corner of the society and economy with its rippling effect. According to the Center for Responsible Lending over the forthcoming four years an estimated 91.5 million families would lose on an average houses valued each at $20,300. Foreclosures would be weighing down the prices totaling to $1.9 trillion.

When property value falls fewer taxes are collected by the cities as well as the counties. This prompts people to walk away from their houses. Such moves aggravate the situation and worsen it. It is this loss of equity that is one of the prime reasons why foreclosure crisis is persisting.

Allowing bankruptcy judges to modify mortgage agreements (cramdown process) would have gone a long way to solving the problem. But the government is still ambivalent on the point succumbing to the pressures of the banking lobby.

Also more federal funds are required for the working of non-profit local groups fighting foreclosures.

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