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Don't Be Afraid of the 'F' Word

By Kevin Spak,  Newser Staff

Posted Jan 31, 2009 10:07 AM CST
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(Newser) – Foreclosures have gotten a bad rap lately, with politicians desperate to prevent them. But foreclosures actually represent one of the best paths to recovery, writes real-estate consultant Ramsey Su in the Wall Street Journal. The people facing foreclosure would be much better served walking away from the negative-equity McMansions destroying their balance sheets. Credit scores can be rebuilt.

Credit markets, meanwhile, will balk at any loan modification, thanks to what now looks like a flawed securitization model. Holders of junior tranches simply have no incentive to agree to a modification. Besides, “loan modification is not only ineffective, it is evil,” Su writes. “Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued…is predatory lending.”

A sign of a house under foreclosure is shown in Antioch, Calif., Thursday, Aug. 14, 2008.
A sign of a house under foreclosure is shown in Antioch, Calif., Thursday, Aug. 14, 2008.   (AP Photo/Paul Sakuma)
In this July 2, 2008 file photo, a foreclosed home is seen for sale in Sacramento, Calif.
In this July 2, 2008 file photo, a foreclosed home is seen for sale in Sacramento, Calif.   (AP Photo)
In this Jan. 20, 2009 file photo, bank repo, foreclosure and for sale signs sit outside a foreclosed home in Houston.
In this Jan. 20, 2009 file photo, bank repo, foreclosure and for sale signs sit outside a foreclosed home in Houston.   (AP Photo/David J. Phillip, File)
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COMMENTS
Showing 3 of 3 comments
bacimom
Feb 1, 2009 10:44 PM CST
what mcmansion? I have a 950 sf townhouse I bought in 1985 that I can not keep payments up on because of various job losses over the last 6 years, a lousy economy, unexpected expenses including funerals that came about after all my savings and 401(k) were spent on living expenses and $18000 in cobra. Not everybody caught in the foreclosure crisis is the cause of it!
Newser001
Feb 1, 2009 6:34 AM CST
READ DAILY: homeequitytheft.blogspot.com
Newser001
Feb 1, 2009 6:18 AM CST
My note is 6.25% $260k, my valuation 3.5 year's ago was $430K, my present street price is $150K and falling, and the forecast is >$80K in 18 months. What about my investment, my improvements, my credit, my life...? I loose my home so the same bank who stole my equity in the first place is rewarded? Writes off the loses and resells at a gain...? PLEASE, give me a frik'n break! These are the same as*hole's who stole all our equity in the first place with their sub-prime schemes, and you're saying they should be rewarded...? Piss off! I'll go through bankruptcy court and demand a principle reduction, fees, and damages before I'll hand over my keys! It'll cost all but $200 out of pocket, and NO attorney involved. BTW - There's a current freeze on California forecolsures - Don't be so quick to bail...

Fannie Mae strikes deal to modify loans, prevent foreclosures
Wall Street Journal

Fed has plan to reduce principal owed on mortgages
Washington Post

Foreclosures offer opportunities
San Mateo Daily Journal

 
housing market • mortgage • credit market • mortgage defaults • foreclosures

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