Why is this?
Its because when you are unemployed or underemployed the banks will not modify the loan amounts.
Its because the administrative paperwork is so incompetently handled that the new loans can not be processed in time and the home is foreclosed on.
That makes sense. One department of the bank is processing a new loan for an existing loan holder and the other department of the bank forecloses on
the home before the new terms are agreed to.
Its because there are so many houses either for sale or foreclosed on it is impossible to get a legitimate comp on a house, making it impossible for
the bank to make a conforming loan on the property.
This is another problem with a relatively simple solution.
Allow the banks to maintain the loans on their books despite the fact that the loan is underwater. Federal law requires the bank to "remark" the loan
and there is currently no way to remark it when it is imposslble to get an assessed value on the home. Because they can not value the home,
government regulations relative to bank balance sheets requires them to foreclose the loan, getting it off their balance sheet.
Give loan holders in good standing some rights. If you have a payment history in good standing, allow folks to remain in their home for a period of
time (5 years) without payment, tacking the 5 year period and interest to the back of the loan.
Enable the banks to maintain that loan on their books as a quality asset, based on the history of good payment of the home owner. Provide for some
renumeration to the home owner for maintenance of the property which can be applied as payment. There are a number of ways to put the home owner on
an equal footing with the bank which is merely complying with federal law when foreclosing.
Adjust the credit rating system to not account for a short sale of a home in this period. Someone who has good credit but is forced to short sell
their home to get out from a loan should not have that incident count against them. Frankly in the current situation we should move to a multi-year
credit history for current score, not the past 12-18 months.
This is a classic example of a government solution butting against government regulations, invalidating the initial purpose of the legislation.
Blame the banks all you want, the federal banking laws are at least half of this problem, if not 3/4.
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