Busted: Bankers and The Global Economy

May 6, 2008

Foreclosure Neglect: Media Panic Ensues

For some time the United States has known about the enlarging mortgage foreclosure crisis and little of practical value has been done to stem the tide of a financial disaster on the horizon. Finally, the mainstream media has picked up Federal Reserve Chairman Ben Bernanke as he warned Congress that additional steps needed to be taken to avert a crisis. Congress is well aware of the situation and has elected to do little or nothing of real meaning so far.

Foreclosure rates were up 53% in 2007 and projected rates for short-term 2008 are higher. Some news outlets are stating an increase of 112% in the first three months of 2008. Congress and the Fed have seen this crisis coming since last summer.

“Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest,” primed Bernanke. Bernanke also stated that unemployment was not driving home foreclosures in all areas. On the west coast, Florida and Colorado, defaults seem to be related to a declining housing market.

Most markets have seen home prices fall up to 20%. Many homeowners have little equity to fall back on because of declining market prices of housing. The Federal Reserve has given lip service to the Hope Alliance program, the enhanced use of the FHA and publicly encouraging lenders to work with homeowners instead of foreclosing.

Apparently, Federal Reserve lip service has not been working. Some banks have been hesitant to foreclose, but have apparently elected to do so anyway. 156,000 families lost their homes in the first three months of this year according to CNN. What is not readily disclosed is whether homeowners have made any efforts to resolve foreclosure problems or whether bankers are simply steamrolling the process through normal procedures and practices at hand.

So far, “doing what we can” has been little beyond lip service and bailing out bankers for the short-term.

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