There are solutions for the subprime lending crisis that entail making changes to the way lenders are handling this crisis. There are distinct groups of individuals that are causing this foreclosure epidemic. First, there is the homeowner who got a "teaser interest rate" that was affordable at the time but became unaffordable when the interest rate adjusted. In addition to the teaser interest rates, lenders started a policy of "no documentation of income" or no-doc loans that did not require borrowers to show proof of their income and are now referred to as "liar's loans". The problem was that homeowners couldn't afford the payment if there were any increases due to taxes, insurance, or an interest rate adjustment.

Next, there are individuals that purposely chose low-interest rate, interest only, and even negative amortization (neg-am) loans with the intent of flipping the property after one or two years and taking a huge capital gain. In the past few years, these "speculators" became trapped, either unable to sell or renting them with negative cash flows. The most viable option for these investors was to give the property back to the lender by foreclosure rather than bleeding monetarily every month.

Another typical foreclosure involved a homeowner cleverly refinancing his property but never making a payment and in effect selling his home to the lender, by taking out his equity on the refinance. There is a lingering question about whether these homeowners had "intent" to defraud the lenders, but that is better left to another discussion. And lastly, there are true personal hardships that resulted in foreclosure. Our estimates are that 95% of these homeowners want to keep their homes but are unable to reinstate the back payments.

Lending institutions can resolve many of these foreclosure issues by:

Having counselors available to work with the homeowner for a

solution. Possible solutions include loan modification (putting the late payments and costs on the end of their loan, accepting partial payments of the amount due until paid, reducing the interest rate adjustment(s), freezing the interest rate for the term of the loan, getting a deed in lieu of foreclosure in exchange for giving the homeowner a credit for a rental truck when they vacate, accepting partial mortgage payments for a limited time, assistance with applying for and getting government assistance including grants that could reduce the loan, and doing financial planning and credit counseling.

If the borrower is an investor who can no longer afford the loan, the

lender should get a deed in lieu of foreclosure, or a loan modification that is workable for both the lender and the investor which would be paid when the property was sold or refinanced.

If a homeowner refinanced and never made a payment, the lender should request a deed in lieu of foreclosure and if the homeowner refuses, the lender should get a judgment after the foreclosure auction and collect this judgment. If fraud is suspected, the case should be pursued by local authorities for prosecution.

True hardship cases should be handled on an individual basis with the interest of the borrower in mind. Loan modification and any other reasonable offers of help should be used to help resolve the problem. If a solution is impossible, a deed in lieu of foreclosure should be requested with a minimal compensation for moving expenses.

While certain banking regulations preclude some of these solutions Congress

and the Federal Reserve must quickly realize the nature of this crisis and its resemblance to the former Savings and Loan crisis. Immediate action should be taken before it becomes expensive for every taxpayer. To their credit, a number of insightful lenders have already taken steps to have counseling staffs on hand and work with homeowners. Now is the time to take more aggressive action before hundreds of thousands of homeowners find themselves no longer owning a home or even homeless.


Links:Midnight Mysteries: Ghostwriting Collector's Edition Game,You're no stranger to paranormal visitors showing up at Midnight, but when a suspicious character drops a threat in your mailbox, you're drawn into the timeless struggle of good versus evil. The fictional characters of classical literature are coming to life, and not all of them are happy with the way their stories ended! Use books to travel through space and time, as you join Charles Dickens and Washington Irving on an exciting adventure through their most famous books. Can you unmask the villain in time, or will the world's most beloved classical literature be rewritten?Download & Play Christmas Stories: Hans Christian Andersen's Tin Soldier,This holiday season, Elephant Games invites you to enjoy another installment of the best-selling Christmas Stories brand!
Read More:The 6 Top Causes Of Dry Hair (4 Of Them Potentially Serious),The Lies Anger Tells Us,Four Effective Uncommon Approaches To Bad Credit Auto Financing,AC Repair: The Best Solutions For Your Unit,Astro boy full movie - Five Movies You Think,5 Top Reasons Why Aboriginal Employment Makes Your Business A Success,Towing: A Safe Remedy to Insufficient Hauling Space,Free California Super Lotto Plus Strategy Tips,Bishops say health reform should include all immigrants, legal or not,Our Words Are Powerful...They Can Change Your Life