House Foreclosures - White House Desperate to stall further foreclosures

White House Desperate To Stall Further Foreclosures

December 5th, 2007

Henry Paulson, the Treasury Secretary has stated that the Bush Administration is following a comprehensive programme to put a check to another wave of foreclosure. They do not want another high tidal wave in interest rates to swallow up more victims. The political ramifications of foreclosures are all too obvious.

Paulson was addressing a housing conference in Washington. He said that the government had done the homework of identifying the different groups of sub-prime mortgage borrowers – especially those who availed of special loans with low five-year interest. Some of the borrowers have clean credit history, steady incomes and could afford the initial mortgage rates. But they cannot now manage the higher adjusted interest. The focus is on this latter section of borrowers. Paulson underlined the fact that the government did not have bail out plans for either borrower or lender. Some reports confirm that the lenders will be asked to continue with low interest for another year to give some respite to the borrowers facing foreclosures.

According to David Hale the foreclosure crisis is most intense in Detroit, New York, Miami and Cleveland. By the following year about 2 million saddled with ARM mortgages will run into default. Two million are at risk! The concentration is among the low-income neighbourhood because the taker of a sub-prime loan is one with a small income and even that job might be always be at risk prone.

The sub-prime loans were pushed aggressively by predatory lending for many reasons. A housing boom was on and many thought that this trend would continue and so this was the opportune time to invest. Loans were taken to buy houses not only to live in but for reasons of speculations. Mortgages were made into packets, bundled and sliced off to distant entities that had never set eyes on the property in question or the locality. This complicated the business of identifying the holder of the deed. The hapless borrower did not know whom to turn to incase of modification. All combined to make predictions go awry and real estate prices began to fall; it continues to fall. Meanwhile – with the number of foreclosures touching millions the entire nation and not just the unfortunate borrowers – lenders, politicians, local municipalities, neighbourhoods, tax collecting bodies, police and you name it, got caught in the net. A tidal wave is a great unifier.