Much has been written about the mediation crisis in this country, particularly amongst those who provided and received so-called "sub-prime" mortgages. Essentially, money was loaned to folks who could not meet traditional lending standards. The loans provided for cheap initialpayments, and then after some period of time, the payments leaped up to a point where many could not afford the monthly payments. We are now seeing record-setting numbers of foreclosures, financial institutions in trouble, and a lack of available funds for lenders to make new loans.
While some financial institutions initially took a hard-line approach to defaulting borrowers, the problem has become so big that many financial institutions are taking a different approach. You see, if financial institutions foreclose on all of these homes, and no one buys them at the foreclosure sale, then the financial institution has to spend money to insure the property, market the property for sale, and maintain the property (things like mowing the grass, sending inspectors to make sure windows aren't broken--you get the picture). Every dollar that a financial institution spends for these pieces of real estate is a dollar off the financial institution's already sensitive bottom line. So these financial institutions really have an incentive to keep the borrower in the home and not to foreclose.
This is where community-based mediation programs can come in and help.
Iowa, for example, is considering a plan where Iowa Mediation Services will serve as an intermediary between lenders and borrowers to prevent the foreclosures. By working together, borrowers and lenders may be able to modify the loans, allowing the borrower to have some breathing room and preventing foreclosures.
Hopefully, states throughout the union will be able to adopt similar programs. Foreclosures aren't beneficial to anyone involved, and the use of skilled mediators can help lessen the financial impact of this crisis.
While some financial institutions initially took a hard-line approach to defaulting borrowers, the problem has become so big that many financial institutions are taking a different approach. You see, if financial institutions foreclose on all of these homes, and no one buys them at the foreclosure sale, then the financial institution has to spend money to insure the property, market the property for sale, and maintain the property (things like mowing the grass, sending inspectors to make sure windows aren't broken--you get the picture). Every dollar that a financial institution spends for these pieces of real estate is a dollar off the financial institution's already sensitive bottom line. So these financial institutions really have an incentive to keep the borrower in the home and not to foreclose.
This is where community-based mediation programs can come in and help.
Iowa, for example, is considering a plan where Iowa Mediation Services will serve as an intermediary between lenders and borrowers to prevent the foreclosures. By working together, borrowers and lenders may be able to modify the loans, allowing the borrower to have some breathing room and preventing foreclosures.
Hopefully, states throughout the union will be able to adopt similar programs. Foreclosures aren't beneficial to anyone involved, and the use of skilled mediators can help lessen the financial impact of this crisis.
No comments:
Post a Comment