REAL ESTATE FORECLOSURES : BANKS ARE READY TO CRANK UP THE MORTGAGE MACHINE AGAIN

courtesy: news.streetroots

As the real estate market seems to be waking from the slumber of a severe crash 5 years ago, many are already calling for a victory of sorts.

As America relies more and more on the service sector and the real estate sector, as the manufacturing sector shrinks, a return to some positive trends in the real estate market is highly anticipated and welcome

But as new regulations have hit the banking sector, and can no longer issue mortgages without a down payment and solid information on the mortgagee, entry to the housing market seems more difficult than ever.

But is it?

Many people were foreclosed upon when they failed to meet payments, and many had been allowed to purchase although woefully unqualified.  The so called 'no-doc docs' were part and parcel of a trend that bordered on the criminal, and that allowed many people to qualify for a mortgage with the illusion that they could, if things got really bad, turn around and sell the home at a profit no less, and avoid foreclosure.

Many however chose to default.  As soon as they realized that their home was overpriced, they decided to walk away from it.  There were no ifs, ands or buts.  There was no recognition that prices might rise again if they waited a bit, nor a bite of conscience.  Almost everyone knows someone who has thrown in the towel and walked away from what until recently was considered an iron clad commitment. Many saw it as dishonorable, other shrugged it off as mere economic wisdom.



It seems not even the fear of a bad credit rating scared these people into honoring their commitments.  

And it seems these people were not so wrong in not fearing the consequences of their actions.  

Banks in fact, are lining up their pencils, waiting for customers to come in again in droves as the 'american dream' is once again owning a home of one's own.

Albeit the conditions for buying homes now are stricter, but is it a good idea to let people buy homes again at a frantic pace?  

There are even new business ventures ready to cash in on the deal: a new survey called YouWalkAway has revealed that almost 80% of people who did default now want back in.  

And apparently people who did default are considered better risks than those who have multiple credit card debts and debts of other nature, rather than just the default.  

What is worrisome though is that these new 'customers' are not a result of excess or even new liquidity. They are just people who 'want back in', and are tired of renting.  And the banks seem to think they are not a bad risk.  Others are just waiting to use their homes as an ATM machine, one of the reasons they defaulted in the first place.

There are even apps, probably connected to some banking offer, that promise to tell whether or not the person is eligible for home ownership.     

 The banks however, might have to wait.  The new FHA rules put in place following the mortgage fiasco, have imposed a three year wait on those individuals who have defaulted on a mortgage. And Fannie May and Freddie Mac, who originate a large part of the loans, have a seven year moratorium on those people who have strategically defaulted.


Partillay sourced from: NBC news .2.21.13

No comments:

Post a Comment