Judges sans Power Will Not be Able to Check Foreclosure Tide
The federal government at Washington has been working hard to bail out Wall Street but so far the foreclosure victims have not benefited. This has led to the economic debacle. Pundits feel that if the judges dealing with foreclosure related cases are sans power the foreclosure tide will remain unchecked. In fact it is likely to worsen.
In 2008 1.6 million houses underwent foreclosure. It is apprehended that in 2009, 2 million more will be swallowed up. Of all the mortgages 10%, calculating to a third of the sub-prime borrowers, are now defaulting.
Foreclosures are causing depression in the real estate market and this in turn is leading to more foreclosures. The impact on the lenders too is not good – they are suffering losses. Houses are being sold at discounts touching 50%. The worst sufferers are the borrowers who become homeless, the local as well as state governments and the community as a whole.
About 12 million mortgaged houses are underwater – the value of the house has become less than the loan amount. This is making refinancing impossible and thus borrowers cannot avail of the low mortgage rates being offered currently. Voluntary efforts on the part of the lenders to come forward with amicable deals have so far failed to produce positive results.
Some advocates are pressing that if the Congress cannot solve the problem the states should be allowed to have their say. But the consent of the Congress will be required, as per the constitution, to allow the judges to alter the terms of the mortgage so as to allow the borrower to stay in the houses that are their homes.
In some states judges are not involved in foreclosure matters. Here the Congress could declare that each borrower has to the right to transfer the matter to a court and thus get over the legal hurdle.
The judge could order a re-valuation of the house in the present market. It will not be an inflated appraisal but a realistic one. Next the judge will expect the borrower to prove that the family has enough income to keep a mortgage running. The expenses towards mortgage must not exceed 38% of the earnings of the family. The last and final step would be the final calculations to make the mortgage affordable for a long term. Such a plan will be comprehensive in addressing the various sections that are affected by the foreclosure crisis.
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