Foreclosure crisis in America

If the Federal Government is going to hand out grants to local govs for purchase and refurbishment of foreclosed houses, let’s tell our local governments what to do with those homes and that money. What if those homes were rented out to families that had lost their homes to foreclosure? Or instead of doing that sell off those homes that were refurbished to investors, and put the money into a pool to help displaced families, refugees from the foreclosure crisis. Is that already the plan? My experience with local governments has convinced me that they seldom have a real plan. So let’s make sure that the plan benefits the community. I know it’s a strange concept, but those guys are elected officials. They might listen if enough people told them the same thing.

What if the local governments passed local ordinances that the owners of foreclosed homes (the lenders who foreclosed that is) had to at least attempt, make an honest effort to keep those homes occupied. That way you wouldn’t have block after block of empty homes, that wind up being targets for vandals, drugs, crime and all that.

What if assumable fixed rate mortgages became popular again? They used to be the thing to have. And if you actually had a decent interest rate connected with that fixed rate assumable you were in great shape if you wanted to sell. I am old enough to remember the eighties, and remember that I bought a home and was happy to get a mortgage at 14% fixed. Sounds crazy now, doesn’t it? That was a VA loan in 1984 I think. And it was a good deal. Conventional loans at that time were around 16%.

There are some assumable mortgages out there now. FHA and VA likely still offer them. But, just follow the money, the mortgage industry in general would much prefer to write a new loan every time somebody buys something.

I would like to hear input on how the foreclosure crisis can be fixed. What are your thoughts? I would also like to hear from people that have successfully worked out mortgage modifications with their lenders. And which lenders are really working with people. Allowing modifications is voluntary on the part of the lenders and many of them say that they have modifications available, but I’m hearing that they are rarely taking place.

I successfully worked out a modification years ago with Chase Manhattan. This was way before the boom bust crisis, though. It worked very well for me. I had been laid off and my ex stopped paying child support in the same month. It was an FHA mortgage and that’s probably why I was able to get a modification through. Before the mortgage was modified it was an adjustable rate mortgage, that started out at something like 5% and then could go up no more that 2% a year and no more than 6% over the life of the loan. It was tied to treasury bills as to how much it went up; and it could also go down, but I don’t think it ever did. Once the modification was done, I wound up with a 30 year fixed rate mortgage at 6.5% or so. It was a good deal. And they let me finance in the payments that were past due, which were maybe two or three.