Posted on Thursday, July 14, 2011
For the most part, these new numbers do not reflect new cases – they are the old cases that have been rotting away in the system due to robosigner gate related delays.
Housing recovery is going to require two simple things: Stopping the losses and absorbing the inventory.
Washington has wasted a lot of time and money ‘discovering’ what we’ve been saying all along – that you cant make a home be affordable. Making modifications the centerpiece for a housing recovery plan was plan dumb. It ignores realities on multiple levels – from borrower pocketbooks to human nature to servicer and investor legal obligations and financial incentives. The bottom line is these initiatives have done more harm than good.
I am confident that - given recent pressures, the fact that these systems are now more or less in place now, etc – folks how should get a modification will get one before year end.
I am also confident that folks who should net get a modification or don’t want one – for example if the home is too far underwater – will get a short sale or dee in lieu in due order as well. These are now well acceptable options and the procedures are in place.
Folks will either get educated and on board or be forced to do so as their foreclosures cases move forward.
At this point Washington needs to do three things;
1. Get the foreclosure cases moving forward again – recovery will not happen until these cases get through the system and that element of uncertainty is resolved. The robo-signer-gate has been a big problem in this regard. Trying to fix systemic problems in servicing while we’re still in the middle of the crisis itself is just dumb and had made things significantly worse!
2. Ramp up programs like FNMA’s Lease for Deed and ability to sell homes to investors for rentals so the inventory gets absorbed. Government is going to have to be involved in how this inventory hits the market and gets absorbed – potentially even coordinating how lenders get rid of their REOs.
3. And refrain from doing anything else that will screw things up – in particular, stop saying the ‘p’ word. Just the ides of principal write downs is encouraging more folks to default…its like winning the lottery on taxpayer backs.