Allowing people to stay in homes is a HUGE mistake, even if these people have to deed the property back. It will just prolong the pain, agony and reality.
There are 3 groups of people.
1. Those that lied about their income and assets and/or bought with 100% financing and never should have been allowed to qualify for a loan in the first place.
2.Those who truly qualified for a loan but chose to gamble with an interest only ARM and now cannot afford a real payment.
3. Those with a down payment who qualified for an A paper prime loan at the time, but now have hardship and cannot afford to pay.
Should any of these groups be allowed to stay in the house when they cannot afford to pay today ??
IF they can afford to pay something, they will not be homeless. Perhaps there needs to be a huge reshuffling of residences. There is something called “RENTING what you can afford”
I know families of 6, 3 generations that grew up in 3 bedroom <1500 sq ft home. Today, if people were told to do that there would be lawsuits that their civil rights were being violated.
Foreclosing on a home and having it sell for what it is worth today would mean dragging down the value of ALL other homes in the area AND create a loss that must be realized on the books. More chaos, more paper wealth disappearing like a hooker on El Cajon Blvd when the vice squad shows up. Vanish into thin air.
If ppl are allowed to stay in the home, everybody can pretend what the value is AND the loan amount remains artificial on someone's books, since it doesn't get paid off at 50c on the dollar.
Mark to market accounting is avoided.
This is absolute artificial accounting about what the value of assets actually are. Solvency of many is truly at risk.
Perhaps many people can afford a house, but they cannot afford the one that they are currently living in. Facing this reality would be painful for millions, to have to be told (and face) that they are living beyond their means, which would probably lead to even more lawsuits of people's rights being violated.
More government intervention is definitely coming.
Perhaps boarding houses will make a comeback and families of 3 or 4 will be TOLD to live in 1 or 2 bedrooms, instead of being given food stamps and extended unemployment benefits to be able to continue to buy things that they really cannot afford, while staying in their 5 bedroom house with a temporary loan modification because it is "good" for the economy and will "stabilize" housing prices. This is delusional.
The govt is putting band aids on a drug addicted patient who just had a lung transplant and is in a coma. Perhaps to some people it looks like they are doing something, but to those who understand, that band aid is going to very little to cure that patient...
