A home is our most prized possession as well as our wisest investment. That’s why it’s a good move for President Bush and the federal government to step in and address the foreclosure crisis in this country.
Although last week’s announcement by the feds is expected to grant reprieves to many Americans, it will not keep many from losing their homes. The administration’s decision to freeze interest rates for some homeowners is good news, but only time will tell how effective it will be in keeping Americans, who took advantage of low-interest, temporary loans called Adjustable Rate Mortgages (ARMs), in their homes. The idea is those homeowners in good standing, meaning those who make their monthly ARM payments on time, will get some help before their mortgages reset next year to current interest rates. The idea is to keep heads in beds and address the common horror stories of homeowners seeing their monthly payments balloon from $1,200 in December of this year to $2,600 in January of 2008.
However, what President Bush’s plan is not able to do is help those who are currently facing foreclosures, and that’s a lot of people across the country, state and in Worcester County. A report was released last week on the 17 foreclosure events in the county in the second quarter of 2007 compared to one in the same time period last year. Additionally, according to RealTrac, an independent agency that tracks foreclosures, there are currently 24 properties in the county facing pre-foreclosure, where notices of default have been mailed; 19 properties currently in auction because of foreclosures; another 22 properties repossessed by banks and/or lenders; and 27 more properties for sale by owner in a last attempt to recoup losses threatened by foreclosure process. All total, there are 100 in various stages of the foreclosure process in Worcester County. The numbers are much worse elsewhere.
As is the case in most of these scenarios, there is no simple fix to the complex problem. In an editorial the day after President Bush’s freeze was announced, The Sun put it well.
“From mortgage brokers to lenders, rating agencies to investment houses, everyone has a piece of the subprime problem. Borrowers can be faulted for taking on debt they couldn’t afford to cash in on the housing boom. But an analysis of subprime borrowers for The Wall Street Journal found that plenty would have qualified for fixed-rate mortgages, which raises questions as to why they ended up with subprime loans,” it read.
Governor Martin O’Malley’s task force, charged with analyzing the foreclosure mess in Maryland, has come up with a series of recommendations including greater oversight of the financing process and expanding options for homeowners to refinance or restructure mortgages to avoid foreclosure. There are lots of ideas on the table, all of which will take a collaboration between the state, federal and local governments.
The president’s action and the task force’s report and subsequent analysis and recommendations are a good start to helping some folks in Maryland see the light at the end of the tunnel. However, make no mistake, it’s a distant sparkle at this time for most property owners who are battling to either keep their home or find a new one. There’s a lot to be done and this could be the beginning of an arduous process.