How to Solve the Foreclosure Crisis

2207 WordsJul 13, 20189 Pages
The foreclosure crisis has become as confounding as the old, neglected house on the corner of your street. With shattered windows and wild lawn, no one knows what to do with it, how to save it or even get rid of it. Public and private institutions have tried this and that to patch the ongoing economic blight: lowered interest rates, credit counseling, foreclosure workshops, short sales and bailouts. Nevertheless, the number of foreclosures has relentlessly continued its climb. This ascent has threatened the viability of entire neighborhoods and the value of most families’ largest and most important asset. It continues to drag on the economy. Easing the burden on cash-strapped homeowners under a heavy debt load does not fall on…show more content…
Another benefit: More jobs as lenders scramble to make short-sale decisions on time. 2. Give perks to equity firms to buy portfolios of foreclosed homes and renegotiate the mortgage principal. Many homeowners stop paying their mortgage when they owe more than the house is worth. They see their stake in the house slipping as they lose value on each payment. Some investment firms are going beyond renegotiating the terms of the monthly mortgage payment — they are adjusting the principal in line with the home’s value, according to Fortune magazine. Selene Residential Mortgage Opportunity Fund of New York buys portfolios of high-risk loans at as little as 40 percent of what homeowners owe on the mortgage. The fund’s representatives work to lower the principal of homeowners who represent the best risk. One Chicago family had its monthly payment slashed by about half to $2,000 because their intention was to stay in the house, according to Fortune. This gave the family of 12 a mortgage that was more affordable on a $90,000 annual income. Not only is this plan beneficial to the consumer, but to the fund’s investors, too. The fund, founded by mortgage-backed securities pioneer Lewis Ranieri, generates as much as a 12 percent return by Fortune’s estimates. The tactic stands to fare better than simply lowering interest rates, a temporary fix. While mortgage payments drop,
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