Government Intervention Doing More Harm Than Good?

With more than 11 million underwater homes at risk of falling into foreclosure, some analysts say that government intervention has failed to do its job. Currently, government foreclosure programs mostly focus on keeping homeowners in their homes and out of foreclosure. But according to some analysts, most of these foreclosure prevention programs fail to effectively tackle the negative equity issue and in some cases worsen the foreclosure crisis.

Critics claim that the biggest issue is laws that bar a subsidiary of a foreclosing bank from handling a notice of default. In Nevada, this type of law forced some banks to restructure their practices. In some cases the bank’s restructuring slowed down the entire foreclosure process. Any bottleneck in the foreclosure process could have a trickledown effect on REOs.

So far, 550 housing related state laws have been introduced since the foreclosure crisis began in 2009. Alfred M. Pollard, general counsel for the Federal Housing Finance Agency (FHFA), agrees that some of laws are causing more harm than good to the housing market. Laws requiring mediation programs before foreclosure, laws that add priority liens to mortgages and vacant property ordinances that cost banks money may all delay but not prevent the foreclosure process. And once the foreclosure process slows, it’s inevitable that REO inventory will thin especially if the slowdown is systematic and widespread. When you want guarantor loans to fund your business, navigate here to learn more.

But according to some analysts, hardline legislative changes are not the only challenges facing the housing industry. Softer government intervention, such as further taxing on those who make a living in certain ways, life for example those who sell gold jewelry could incur some serious setbacks and repercussions because of this intervention. High unemployment and a general decline in housing prices may conspire to leave some homeowners financially vulnerable to negative equity as well.

 

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