The Law Waits and Watches Foreclosure Fallouts
Mortgage defaulters who are facing foreclosures are waiting for help from Washington. The authorities however have taken a wait and watch stand to the fallout resulting in years of lending practice without being backed by sufficient credibility.
The market is showing signs of self-recovery and the overall economy seems to remain untouched. At this point overreaction is uncalled for. Also encouraging are the indices showing solid consumer spending and low unemployment rates. The stocks too have hit records buoyed by corporate profits.
The Chairman of Federal Reserve opines that while on the one hand the authorities are obligated to end fraudulent lending, they have to be cautious about suppressing responsible lending
On the other hand the advocates for the affected consumers point out that this has come has a rare chance for the law to strengthen its lending rules. To substantiate their argument they point to foreclosure statistics.
The National Association of Realtors expects sales of present houses to fall by 4.6%. The home price median is anticipated to drop by 1.3%. The foreclosure rate is rising at a double rate annually all over the country.
The President of the National Community Reinvestment Coalition, John Taylor, representing the interests low-income people and minority groups, is skeptical of the outcome if the government fails to intervene.
The Mortgage Bankers Association however predicts that foreclosures among risky borrowers will amount to 0.25% of the country’s mortgages.
Democrat Senator Dodd is spearheading a movement to assist affected homeowners, with the help of big lenders – big names in the financial world like HSBC Holdings, Citigroup etc. They suggested modification of loan terms before hiking interest rates. Analyst Adeson, citing Dodd’s endeavours, warns that the housing market will suffer more if over enthusiastic banks arrange for loan workouts. He commented that lending money is not about being nice but it is all about business. He has cited the instance of Hedge Funds to prove his point.
Lawmakers are trying to work out a balancing trick between relief to borrowers and reining in of bad lending practices. Nobody wants to choke to death the sub-prime market. Senator Miller, a North Carolina Democrat has long been fighting predatory lending. He is confident of passing quickly a Bill in the House modeled after consumer protection laws in states like North Carolina and New Jersey, where reforms has not led to end of credit.
