Putting Brakes On Foreclosures

Posted in Foreclosures, September 13th, 2007 |

Hundreds and thousands of Iowans are ruing the day they took sub-prime loans. The situation is so alarming and grim that the state’s attorney general, Miller, has set up a hot line and sketched out a plan of action to help borrowers negotiate with the lenders for new terms.

It is reminiscent of the 1980 farm crisis when lenders honed in on farmers with foreclosures leading to a slump in the agricultural sector. At that time a private non-profit group acted as middlemen and saved many farms from foreclosure. Today also Miller is following the same strategy and working out a plan with house loan companies and the borrowers for alternatives.

Iowa ranks fourth among the highest foreclosure rate at 8.6%. Reliable data releases show that 30,616 sub-prime loans had been served notices and over 2,600 were in the middle of the process. 11.8% had gone into delinquency and 14.5 had crossed the time limit for making up dues.

Miller anticipates worse days ahead and points the accusing finger at the sub-prime market for being the prime suspect. Borrowers are traumatized when overnight monthly payments somersault to more than double. Sub-prime lenders had resorted to predatory tactics by falsely appraising property values and offering financial gratis to tempt borrowers. Many states have now clamped down prohibitory orders on such unethical methods.

The lenders too are in a soup with so many units going into foreclosure. So the best way is to establish links between the two ends of the pole says Thompson the director of Iowa Mediation Service. The best way will be to bring into effect a new agreement by which the lender avoids foreclosure expenses and other allied losses.

Miller has set into motion a task force comprising of 10 personnel to communicate with mortgage servicing companies and other investors so that the loan is modified to feasible levels and put a brake on foreclosures. Meetings will be held this month in Iowa and next month in Chicago.

The steps taken on the national level is a repeat of the Iowa experiment. Behind it is the acknowledgement of the fact that borrowers, lenders, investors as well as the mortgage companies all have their own interests at stake in this matter of foreclosures. The appeal is to the ethical self-interest of all parties concerned. The government too has its own axe to grind.