An Expansive Discourse on Foreclosures By Federal Governor Kroszner
August 28th, 2008
In February this year the Federal Governor Kroszner gave an expansive discourse on foreclosures.
He elaborated that the mortgage industry has always been one of the pillars of the economy of USA. Today it is facing grim challenges especially in the sub-prime category. The latter has been noted for serving the weaker sections of society. Till November 2007 20% of the sub-prime ARM’s had become delinquent – this being double the number of 2006. On these more than 171,000 foreclosure proceedings were initiated during the third quarter – a spike of 36% from the previous year. The notable factor to be observed is that the borrowers of these mortgages are defaulting within months of its start.
There may be other causes but the prime reason seems to be predatory lending practices. It has caused many to be tricked into taking mortgages they could not afford. The outcome was foreclosures that negatively impacted the individual as well as the community. Confidence in the investors has been undermined leading to nearly a complete closing down of the sub-prime market. This has made it difficult for aspirants with weak credit to get loans and own a house.
The foreclosure crisis has highlighted the aspect of the link in common interests involving borrowers, the communities, the lenders as well as the investors. Thus it is imperative that borrowers should be protected. Predatory loans that make borrowers lose the houses that are their homes and strip it of equity should on no account be tolerated. To increase confidence in investors it is required to oversee the underwriting standards. It calls for consumer protection. It produces a benefit that will touch the welfare of all in the chain. There will be a flow of capital and housing transactions will continue to run without roadblocks.
He then went on to suggest certain initiatives as remedial measures as well as discuss new regulations that will check fraudulent abuse and injustice and deception in the field of residential mortgaging. Unnecessary foreclosures must be stopped at any cost.
It is to the interest of all concerned to avoid foreclosures. The lenders have to spend huge amounts of money, time and energy to foreclose. Therefore “ prudent loan modification programs” have to be chalked out to help all the borrowers on a long-term basis. For this purpose a leading role is being played by The American Securitization Forum (ASF) and Hope Now Alliance.
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- Moral, Social and Financial Issues Behind Borrower’s Decision to Walk Away From Foreclosures
- Foreclosures are Persisting While Price Slump Too is Continuing
- Foreclosures Somewhat Halted by Loan Modification Programme
- Experts Fail to Reach a Consensus on the Severity of the Foreclosure Crisis in New Jersey
- Foreclosures are Spawning a New Set of Landlords
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