With all these massive government programs designed to help distressed homeowners being introduced, revised and revamped, the question is, do they work?
According to ForeclosureRadar, they work to delay the inevitable, but not prevent the inevitable. Check out their evidence based analysis here.
In a presentation delivered to the California State Senate, ForeclosureRadar reported that Notice of Default filings and Notice of Trustee Sale filings continue to rise, while Trustee Sales decline. Cancellations of Trustee Sales are on the rise. But the number of Trustee Sales and Cancellations do not completely offset the number of properties entering the foreclosure process.
Foreclosure Radar also demonstrates how laws such as SB1137, which required lenders to contact the homeowner 30 days before filing a Notice of Default, only had a temporary effect: once the lender had time to get its systems in order to send out the required form letter to the homeowner, Notices of Default skyrocketed back up to previous levels, and even exceeded previous levels.
One thing government programs have done is to increase the time it takes to complete a foreclosure, due to new administrative requirements imposed by the laws. That just seems to cost money and time, without having any positive effect for the homeowner (other than free rent!).
ForeclosureRadar also points out that none of the government programs has addressed how to prevent mortgage delinquencies, and that number continues to increase unabated.
The take away point is that government intervention has succeeded in adding delay to the foreclosure process, allowing the banks to “avoid” losses on their bad loans now because they have been “encouraged” by the government to put it off for a while. New programs such as HAFA (which encourages short sales) and revisions to HAMP (by allowing principal reductions) finally address the issue of negative equity. But in order for these programs to succeed on a grand scale, the banks would have to absorb so much in losses, that they, and the FDIC, could not handle it and survive.
Doesn’t sound like the cost of these programs has been seeing much of a return on investment. If a business had introduced these programs and saw those kind of results, a prudent business owner would cancel these programs immediately and re-evaluate. Shouldn’t the government do the same?
Tags: default, delinquent, Distressed Property, Foreclosure, HAFA, HAMP, Notice of default, notice of trustee sale, REO, Short Sale, Underwater Mortgage