Help Is On the Way — Not!
The Wall Street journal reports that little is being done for homeowners facing foreclosure despite all the sound-biting from public officials and lenders. A recent study by the State Foreclosure Prevention Working Group found that 7 of 10 borrowers in trouble aren’t getting any help with their payment problems and aren’t involved in any kind of workout with their lenders. This shouldn’t surprise anyone. According to another WSJ article last year the vast majority of subprime homeowners in foreclosure were there because of circumstances completely beyond the control of the lenders. Rather than defaulting because their rate adjusted up and the payments were unaffordable, most troubled borrowers (58.3%) reported being delinquent because of a decrease in household income such as a job loss. Other reasons included medical bills or illness (13.2%), divorce (8.2%), inability to sell a home (6.1%), and death (3.6%). Only 1.4% of loans went into default because of payment adjustments. So it makes sense that rolling back rate adjustments won’t help most people. And workouts are not granted unless there is a very good chance of preventing a foreclosure and not just putting off the inevitable — something that won’t happen if the borrower remains ill or unemployed. It seems like fixing the economy will do more for homeowners than bandaging their loan programs.
