Got Foreclosure! - Blog

“The Bush administration, trying to deal with a worsening housing slump, announced a new initiative Tuesday aimed at helping homeowners about to lose their homes. For qualified homeowners, it will put the foreclosure process on hold for 30 days.” (AP)

Oh boy! There goes another 30 days… Granted, in some areas of the country this might actually help (because the foreclosure timeline is as short as 21 days to begin with.)

However, in areas like California, Arizona, Nevada etc. where the foreclosure timeline gives home owners 60 to 120 days to begin with (after they’re 3-4 months behind…), this initiative will not bring any significant relief.

As a matter of fact, an extra 30 days will add another monthly payment to the loan balance, and therefore make it that much less likely to find a buyer at a price that covers the loan.

So it comes down to piling on larger losses for lenders in the longrun.

If anything this will prolong the housing downturn, as lenders will have to keep non-performing assets and reserves on their books longer, which in turn worsens the credit crunch.