Posts Tagged ‘Strategic Default’

Foreclosure – The Politics Behind the Process

Monday, October 11th, 2010

What type of future will we have if the process of collecting on a debt becomes politicized, and instead of focusing on any semblance of the facts, we merely look to what is politically correct?

 

This is what is at issue with the current foreclosure debacle. Is there anyone who is looking at the facts, rather than whether or not this feels good? Evicting someone from their home, whether in a foreclosure or rental non-payment, is never easy, nor is it pleasant. However if we do not create an environment of responsibility, and accountability for one’s debts, then how can our society, and capitalism survive? Strategic defaulters are doing cartwheels in the streets celebrating, and many of their neighbors are considering whether they too should jump in on this seemingly free ride. This surely cannot be the policy direction that any of us are in favor of.

 

If however, anyone in this mess has been wronged – anyone who is legitimately making their payments and being forced through the foreclosure process – then stiff penalties should apply.

 

The system would be better off for all involved if there was an “expedited” process in foreclosure. Starting with the decision to buy a home, potential buyers would think harder about what they are doing, for the lure of living in a home for up to three years payment free would not exist.

 

Wouldn’t better decisions have made the sub-prime crisis less so? The real estate market surely would have found a bottom by now as all the impaired inventory would have already made its way to the market. The rental market would have strengthened, and may even have seen a resurgence in new building. Banks would lower rates as the cost to collect would fault, and the residential assets would be much more attractive.

 

In return for a much more streamlined foreclosure process, the government could impose a small transaction fee that could be used to fund an assistance program for those who are truly hurt by the economy, or other factors.

 

Are better assets, lower rates, less taxpayer assistance, a funded assistance program, no politics, and a functioning financial system really too much to ask for?