How Foreclosure Works
We are all aware of the foreclosure problems US is facing and quiet serious right now. Hundreds of thousands of "home owners" are underwater, and owe far more on their homes than they could ever sell them for.
Many of these homeowners have come to the conclusion that giving up their home is a better financial decision than making payments until real estate values recover. Lots of these "strategic defaulters" can afford their mortgage payments.
Just as how the foreclosure process works, it normally takes at-least 8 months of missed payments before the bank will actually finalize the foreclosure and repossess a house. With the huge number of foreclosures, some banks are literally taking years to initiate foreclosure auctions. They don't want to add the losses to the books and so are postponing foreclosures as long as possible.
Foreclosures has added benefits to it. Not only that it can completely erase all your debt from the foreclosures, but also allows underwater homeowners to save money by not making any home payments for many months.
Providing what is known as "stealth stimulus is the flaw in the foreclosure process.The people who are living rent free homes while the foreclosure process is undergoing are actually helping the economy with the huge amount of they have.
To be specific, some owners of underwater homes listed in the Boston Massachusetts MLS are actually making money off of the foreclosure process by renting out their homes that they aren't making payments on.
Foreclosure was meant as a way to protect banks from negligent borrowers by using the real estate as collateral. With the current real estate market, and crooked lending practices that occurred during the housing boom, foreclosures are providing the opposite effect. Undergoing through a foreclosure process can literally provide financial benefits to the borrower while transferring to the bank.
Strategic defaulting provides huge financial relief to insolvent borrowers but somehow might be unethical in other ways. Because of the slow foreclosure process that stimulates buyers in today's slow economy to give out extra cash to people who need money for housing repayments.
Posted at 07:05AM Nov 04, 2010 by Cornerstone Real Estate in Real Estate |