Can Bush Make the Foreclosure Crisis Disappear?


 

2007 has been labeled the year of the sub-prime meltdown and the exploding ARM.  With the high cost of housing in Southern California many homebuyers elected to take on mortgages with a two or three year fixed terms would later turn into an adjustable mortgage.  For many households this adjustment could mean increases as much as $1000 for even entry-level borrowers, hence the term exploding arm.  Many articles have been written advocating that the borrower contact their bank and attempt to renegotiate extension on their introductory interest rate, which would allow the sub-prime borrower to continue paying a payment that was affordable.  Very few homeowners were successful with this strategy, which is exemplified by the number of foreclosures in today’s real estate market.
 

Normally real estate markets have slumps when the underlying economic picture of an area has slipped, causing higher unemployment.  This has certainly not been the case in the 2007 real estate market.  After one year of shock waves throughout the financial communities around the world, the Bush administration has finally awoken.  The shock waves were large enough to close most mortgage banks including the 10th largest bank in the United States.  For the most part that be of B of A’s, Wells Fargo, Washington Mutual, Chase, and Citigroup are some of the remaining banks while others like New Century, First Magnus, and Fremont are examples of those that failed.
 

With many communities dealing with bank foreclosures on their streets and falling real estate prices, which in some neighborhoods have seen declines of as much as 30% in value.  Something needed to be done.  Initially the Bush administration’s attitude toward the problem was that it was up to the individual homeowner to solve their problem and the government wasn’t going to bail out individual homeowners.  But Banks took a hard line on allowing for extensions on the initial start rates of the adjustable loans.  This created a situation with a large number of people walking away from their now unaffordable homes, and declining values which led to the current credit crisis in the financial markets.  With a huge number of sub-prime ARM’s adjusting in 2008, the Bush administration has finally taken action.  A plan is being negotiated with most major banks to allow for borrowers to extend their mortgage at the rate they have, which will give them motivation to continue making payments on their homes rather than walking away.  The plan calls for an evaluation on the borrower’s ability to make a higher payment.  With California’s high cost of housing most families could barely afford the payments at the time when they purchased their homes two or three years ago.  It is very likely that most families can qualify for this kind of extension.
 

With this type of plan in place there is a high probability we could see a major shift in the number of foreclosures in the real estate market and possibly a rebound in home values as fewer and fewer bank owned homes are available.  Unfortunately for many homeowners who lost their homes, the banks and the Bush administration were slow in responding to this crisis which has been felt around the world.
 

Co-written by James Dedolph and Randy Nathan, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate .

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