When the banks and mortgage companies designed the zero prime loans for their own benefit and profitability, it was under the guise of satisfying the liberal Democrat congress’s demand for lenders to make home ownership more accessible to lower income Americans. Countrywide and others designed the mortgage instruments to trigger wholesale refinancing in order to create a tidal wave of fee income for their companies. Our government and these lenders as a group were both guilty of causing the destruction of the housing market which has caused foreclosures to fall like a long cascade of dominos. First, the low income zero prime homeowners lost their homes to foreclosure, then the speculators and now, three years later, foreclosure is infecting the middle to upper middle class who were either laid off from their jobs or those homeowners whose business revenues slumped so badly that they could not even collect their normal salaries from their own businesses. Meanwhile, the banks and lenders have done little to stop this self inflicted erosion and have done everything in their power to force the mainstream innocent homeowners who were once dependable customers out of their homes, destroying their credit and often suing these victimized homeowners in court for deficiencies.
The key to the problem is to sort out and separate the core middle class customers from the low income borrowers (who never should have been given a loan) and the speculators. Once this has been accomplished these affected defaulting customers should be given time, and the proper modifications to their loans necessary to avoid foreclosure and get them back into a secure position. Modifications should be a flexible formula of lower interest rates, interest only, loan increases placed at the back end of the loan, balloon payments at the end of the loan and in some extreme cases, forgiveness of principal. Helocs should be merged into the first mortgage and readjusted.
As we ALL AGREE, it is the responsibility of our government to 1. PROVIDE LEADERSHIP and 2. PROTECT ITS CITIZENS AGAINST HARM. Since the US economy went into a nosedive in 2007, foreclosures and defaults have been growing at an alarming rate. It takes only one word to describe our government’s reaction: CONFUSION. Since the Obama Administration and Congress are and have been confused, no strong leadership and solid plan to help homeowners in crisis has emerged and the banks and lenders have been getting away with financial torture, abuse and grand theft. Oh you may think that they are the lenders or the lenders service company so they have the right to take the properties back. Yes, true in “Normal Times”, but these are not normal times and the first step President Obama and Congress should do is to declare a National Crisis and come up with rescue plan to keep as many families in their homes as possible and get them back on firm financial footing. We all also know that this cannot happen until the economy improves, tight money ends and business income expands.