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January 9, 2012

Delaying Foreclosures is Part of the Housing Problem!


Recently, an article pointed out that the number of days it takes to foreclose on a delinquent home on average has gone from 253 days in 2007 to 674 days. This near tripling of turnover in the housing market (not to mention the re-selling for the foreclosed property) is having some devastating effects on our economy.

Housing Prices

Housing prices, who declined played a large role in the recession of 2008, cannot rebound if foreclosure conditions are so unfavorable. With people staying in homes for nearly two years without paying the mortgage, it is likely that if something breaks they are not going to fix. Imagine how problems come up over the course of 2 years that aren't fixed and as a result, the house falls into disarray.

This effects the value of that home and the others around it. Once the bank takes control of the house, they are certainly going to have to take an additional haircut for the time they waited to take it over. That money lost could have been used for a small business loan or a consumer loan. Basically, the fall in housing prices not only effects the consumer, it effects the banks ability to generate capital.

Jobs

Job creation is tied into the housing market and foreclosures. For one, a person who is in a foreclosed home does not have the mobility to job hunt in other markets. They are geographically fixed to their location.

A Note on Resale

By not getting these houses back on the market, and not selling the houses in bulk to investors, the banks are doing the economy a disservice as well. Getting these houses in the hands of people who can rehab them and rent them out is key to the price stability. Additionally, renovating these homes will lead to direct job creation.

There has to be something keeping these banks from liquidating their foreclosed housing assets.




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