Boston Finds Cure for the Mortgage Crisis

What Are the Banks Doing? Most news reports show that the big banks are not cooperating with the HAFA program and are still very reluctantly cooperating in short sales. Therefore they allow properties to go to foreclosure. Some experts have claimed that on average it costs the banks between $30,000 and $50,000 more to foreclose on a property than to accept a short sell. Then we sometimes hear that the banks are after the property or are out to get the little guy. This is not credible because most banks are publicly owned and must answer to a board of directors, as well as to share holders. Banks, like any business, exist to make profits. Therefore, it should stand to reason that if a bank chooses to take the foreclosure route instead of the short sale route, it must be more profitable. After all, it’s business. One possible reason is that the banks do make more money by foreclosing on homeowners. If a bank forecloses on a property that has mortgage insurance, the bank is likely to be reimbursed up to 80% of the value of the home, many times leaving the bank with the other 20%, and the home. The home will probably sell at more than 20% of its original value, and the bank will write off the loss from the defaulted loan and costs to repossess it. This will add up to more than 100% and many times can more, much more than cover the costs incurred to take the home back and resell it as is and with minimal repairs. So by throwing people out of their homes, by blighting neighborhoods, by cashing in on their insurance (driving some Mortgage Insurers to the breaking point) and by having you and I (taxpayers) reimburse them for their losses (and TARP), they can exit the situation better than ever. This is business and that is profit for shareholders. Banks do not exist for the general welfare of the public. One Innovative Solution Where Everyone Wins Enter non-profit Boston Community Capital (BCC). Here is a non-profit that makes good business decisions. BCC started a highly successful innovation by taking look at people in foreclosure. The first thing it noticed was that they were still employed. After running the numbers they also discovered that the homeowners had tried to modify their mortgages and were denied. Many tried to do the short sale and were denied. Yet at current market prices they could pay the mortgage. What’s the profitable business decision that BCC made? They bought the foreclosed homes and sold them back to the homeowners without ever evicting them. This resulted in the neighborhoods being preserved, no families being thrown out of their homes (and on the public dole) and to date not one single mortgage has defaulted, so now there is stability, leading to recovery out of this tragic mess. There is a way, but the short-term profit hunters are still blind to it. Boston Community Capital is making money and with its money it is able to buy more foreclosed homes and help more people. A for-profit institution could do the same. This is pro-America and it is pro people. It defends property ownership and increases stability. This story is available through many sources. The following article seems to be the most thorough. Click here to read

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