Lenders Pursue the Path of Revenge After Foreclosures

Foreclosures are running along at high speed. During the 3rd quarter of 2009 there were 1 million foreclosures. Top on the list were Nevada, Arizona and California. There are no signs of it having reached the bottom. The impact on the economy is even more disastrous. It seems to have become a never-ending story. For decades to come, the pain will remain even when the dust will finally settle.

Lenders were not unaware of the risky situation even prior to the outbreak of the housing crisis. They knew. Initially, standing before the public, they tried to put the blame on the borrowers for taking foolish loans. But the sheer number failed to convince anyone. How could so many borrowers be so naïve and foolish? However many thought that having faced the foreclosure music they could start on a clean slate.

At the very time the mega banks were pleading for bailout, the second wave of foreclosure surged forward with commercial investors battling to keep their heads above water. This group, termed the flippers, was trapped with a pile of inventory at the time of the market crash. They could not sell so they shrugged it off as bad deals and began to walk off. Many of the investors were the big banks themselves like Morgan Stanley. They too walked away from their properties that had gone underwater without paying a dime as penalty. Only their beneficial tax was written off.

But for those not in the banking corporate lobby the story does not end with foreclosures or walking away. The next wave was the most emotionally charged and the banks were wise enough not to harp on the same string about faulty borrowers. These house owners had qualified for their loans and been religiously current. They viewed their properties as an investment made for a lifetime. Along with the rest of the market the value of their units also fell. The financial mess they endured was beyond their control. They lost the jobs that brought in the funds to pay for their mortgages. They were not over ambitious flippers or buyers who were not eligible for loans. They made up the foundation and the base of the economy of the country.
The latest news is that another surge is about to lash the shores from the most foul smelling onion layer. People are walking away by droves from underwater mortgages and a hue and cry is being raised about ethics. Those walking off are properly employed and have assets. Even then they can read the writing on the wall and are calling it a day.