Maybe Foreclosure Isn’t the Worst Thing
We all get that mortgage foreclosure is a bad thing, in an absolute sense, but I can’t help but wonder whether this is actually a positive development for borrowers, lenders, or the entire system:
Retsinas said that the increase in people three months behind on their mortgage coupled with the drop of mortgages entering the foreclosure process likely indicates some sort of intervention is preventing those borrowers who are seriously behind from entering foreclosure.
Possible interventions, he said, include cities passing ordinances that have made it harder for banks to foreclose, especially on multi-unit houses. Also, federal regulations have encouraged banks to allow borrowers to “modify” their mortgages and lower their payments by changing the interest rate, repayment term or, more rarely, the amount of principal due.
It seems to me that it mightn’t be in the interest of anybody to prolong a difficult situation, whether that means postponing payments to the end of the agreement or some other mechanism for passing along the underlying financial problem.