Why Do Foreclosures Continue to Rise

 

MSNBC wrote:

Unemployment is part of the reason that foreclosures are now claiming the homes of families that took out conventional mortgages, put 10 percent to 20 percent down and have now lost their income. None of the government’s programs were designed to deal with people in this situation; unemployment was hovering around 6 percent when Treasury enacted Making Home Affordable.

On a personal note, I find it hard to believe that no one in the government was able to speculate that unemployment could be a factor in the increase of foreclosures across the country.

The Making Home Affordable Program (MHA) was not designed to provide relief for homeowners who owe more than their home is worth — either because home prices have fallen or because the price they paid for their home was based on a fraudulent appraisal, or both. There is no provision in any of the government's programs requiring a lender — or even offering incentives to a lender — to forgive part of the principal owed, even if it clearly represents home equity that will never return.

The current foreclosure relief program states in essence: That this issue is the homeowner's problem and not the lenders. Regardless of the fact it was the lender who made the unimaginably costly miscalculation when it approved the loan in the first place, speculating that house prices wouldn't fall.

Some members of Congress have tried and failed — more than once — to pass a law that would have provided real relief for homeowners. A simple change in the bankruptcy law would let a judge modify the terms of a mortgage from the bench, just as they do for every other form of debt, from credit cards to car loans to mortgages on second homes or yachts.

Each time the change was proposed, lenders fought fiercely to stop it. None of the other measures the government has tried — from the Hope Now Alliance to Hope for Homeowners to Making Home Affordable — has made any significant dent on the pile of bad loans that is forcing families from their homes, driving home prices lower and creating a gigantic headwind for any economic recovery.

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