foreclosure crisis. Broadly speaking by foreclosure is meant all the stages of this judicial process from default and auction notices to bank repossessions.
The sub-prime mortgage with floating interest has been primarily held for the catastrophe leading to innumerable vacant Reo homes dotting the country. The sub-prime mortgage was launched with the laudable intentions of giving many, who could not qualify for prime loans, to get a loan so as to own a house. This is the great American dream. Unfortunately due to many reasons plans went awry and today the foreclosure virus has penetrated each corner of the socio-economic structure.
Reo homes are the final stages of the foreclosure run up. When a borrower defaults, a notice warning notice is sent by the lender. This is the pre-foreclosure stage. The lender also seeks the permission of the court to prove his case and seize the property that has been kept as security to realize unpaid dues. If the court is satisfied then a date is fixed for the auction of the unit. If the Sheriff’s auction fails then the banks repossesses the houses and from there on starts the story of Reo homes.
With the banks having eaten more than they could digest today they are overburdened and pulled down by thousands and millions of Reo homes. The banks do not have the infrastructure to manage the huge number of Reo homes. Reo homes have become a big headaches for banks. Too many Reo homes have glutted the market and brought down the price of properties – whether foreclosed or not. It is a simple equation of there being more supply than demand. The slump in the real estate market is negatively impacting on the general economy.
Most of the Reo homes are in a state of disrepair. The previous owners in rage and frustration, more often than not, have caused extensive damages to the units. Whatever damage is left to be done is completed by vagrants and vandals that sneak in yanking off fittings and fixtures. It is a regular racket in Reo homes with a chain of dealers dealing in junk. The Reo homes become dens of drug pushers and prostitutes that cause the neighbours to sell of their good houses and flee the locality. The Slavic Village is one such glaring example of the damage Reo homes houses can do to the locality.
Some repossessed houses are in such a derelict stage that these have to be bulldozed down. In Michigan farming is being undertaken on vast tracts of land in the hearts of urban sprawls – sometime marijuana is cropped!
Fictitious landlords, to earn quick bucks often let out empty houses. The tenants are suddenly caught unawares when the banks knock.
The government is suffering from less tax collection, more maintenance work and less funds for public utility services.
In desperation the banks are offering huge discounts and free bus trips to attract buyers for these Reo homes.