Government Considers Foreclosure Freeze

I agree and I didnt put the whole story but I did put the link in hopes it would grab attention and you would read it. The bad mortgages out there are just that. They were bad from the start. They were trying to put EVERYBODY into a house when not everybody was ready.

Good for her, I wish more people would have been as well informed!

Right, too many people were taken in by the empty promises and bad advice that lenders were giving to consumers. Several years ago my friend's daughter was looking for a townhouse and had been prequalified for $125k, 30 year fixed rate mortgage by her bank. She had a couple of real estate agents showing her properties in different areas because she wasn't sure where she wanted to live. One agent constantly showed her homes in the $175k to $200k range and insisted that a lender who worked with him would put her into a nice ARM with a great initial rate...lower than that fixed her bank was offering. He assured her that interest rates would go down in the long run. Fortunately, she dumped him and bought something she could afford, using the 30 year fixed. Had she believed the snake oil salesman she would have lost her home by now.

Most likely a minimum of 50%

The problem, andy, is that the lenders were not cooperating when it came to modifying these loans, dragging their feet until they could foreclose, and the government was powerless to do anything in response. Unless I read the article wrong, the lender will be required to work with the homeowner on a loan modification before the property could be foreclosed on.

We did this in the eighty's and it worked. Yes, some of those people still lost their houses but for the most part these are people who can afford their houses when the payments are reasonable (or based on a percentage rate of 6 to 8 percent) when a house loan goes from 5 percent to 20 percent very few people have that kind of ability. When the loans got locked in the eighty's I knew a lot of private people started buying those loans because it was a good return and at a locked rate they can then figure out if it is profitable. Most of these people are honest folks who did not realize what they were getting in to or had not lived in the middle country during the savings and loan debacle. They had never seen house prices plumit and thought they would have the oppertunity to get refied before the interest went up. And many mortgage brokers sold that very idea to them. Many banks in the eightes quickly learned that it was advantagous to leave those people in their homes and rewrite the loans acordingly. The problem now is that the banks don't hold the loans, some intity (no names here) are still trading that paper on the market.

The government is not powerless by any stretch. The banking industry is the most heavily regulated and controlled industry in the entire US, and most of the world. Further, the problem isn't that the lenders were not cooperating. Lenders have invested interest in cooperating as much as they can. Something you may not know is, when a lender successfully signs a modified loan with the government, the lender receives federal money for the loan, and a guarantee of more money for the loan, then they would have gotten if it had been left unmodified. So the lenders have every reason in the world to modify the loan. The problem is, government doesn't have an unlimited supply of money. Thus there are dozens of rules that the mortgage must comply with in order to get modified. So only a tiny fraction of loans are actually approved for modification. It's a bit like the cash for clunkers program. A program designed to last a year, lasted one week because government doesn't have an unlimited amount of cash to hand out for junk cars. Car lots all over the country ended up eating the cost of cars they thought they could get money from the government for, and ended up losing their shirts.