Wednesday, November 10, 2010

Thoughts Sent to Me on Foreclosure Crisis

Who are the benefactors of the defaulter stimulus package? Many defaulters just stay in their homes because they have made a conscious decision not to pay the banks any more money on their underwater homes, or in anticipation of a loan modification approval. Some are unemployed, staying put for as long as they can in an effort to get their personal finances together and on with their lives. There are a despicable hybrid of defaulters sharing their misfortune with others by moving out of their home and renting it to some unsuspecting soul. The landlords collect and pocket the rent for as long as the scam runs and lender/servicers evict the occupants at the end of their lease term, if they were lucky enough to get a bona fide lease agreement.

Local municipalities also suffer because of an eroded tax base. Providing basic services to a community that may not have realized an actual reduction in population, only in revenue, is daunting. Defaulters do not pay property taxes, limiting the pool of funds available, straining the already burdened local economies.

Most people on Main Street have little sympathy for the banks and the investors even though there is definitely a loss associated with defaulting loans. It could have been a very different story if modification and principal reduction were more of the norm than the exception. Defaulters creating their own stimulus packages could not have been something any of us would have predicted, but when in dire straits and with no viable alternatives, many have adopted this behavior.