Avalanche of Troubled Mortgages

I think there is a plethora of troubled mortgages out there right now and it is because of the measures put in place by the government.




Right now people are turning to either foreclosures or short sales. In this case, short sales literally means that the lender agrees to accept a payoff that is lesser than the mortgage amount in satisfaction of the loan, this helps people whose houses are now worth less than the mortgage amount.



I believe that the government has provided the tax credit of 8000 dollars and this has indeed spurred sales and that is the prime reason for the revival of the real estate industry. However, I do believe that this temporary rise will fall back hard on them once the stimulus package is removed. What I want to say here is that it is not only a matter of plummeting of sales in the houses; my point is that the number of foreclosures will surge tremendously. So this is a lose-lose situation here, you lose the sales and the number of houses left empty surges like mad.



Not only that, the real estate industry has an extremely high centrality. What I mean here is that when it falls, a lot of other industries will follow suit inevitably and this is extremely bad news.

Okay, I will present a succinct paragraph here about the whole repercussions issue here. As we all know, unemployment rates are hitting an all time high and even people with jobs are not having an easy time now either. This leads on further to a lack of income or even no income at all. Then, people start to drag on their mortgage payments every month and they soon ended up in a dead-end, foreclosure. As more and more houses are left lying out there along the streets, the real estate market starts to languish due to a lack of sales and a plethora of unoccupied houses left lying there.

Then, we see the construction companies forced to drop projects because houses are not selling at the moment and constructing new houses will be pointless since no one will buy them no matter how enticing they looked. Then we move on to what constitutes a proper house. Furniture, lighting, bricks, cement, steel, electricity, utilities, all of these industries will collapse upon one another, piling on each other. But, fear not because the banks will come in and provide loans to revive these industries but won’t this move lead to more bubbles building up in the banking industry? Haven’t we already seen enough of the damage caused by the burst bubbles?



A chaotic situation will be plausible if the government does not attack the roots, the paradigm of people. It is of paramount importance now, to ask them not to buy houses and cars already, if they simply do not have the wherewithal to support their purchase. The key here is to instil some rules and regulations to regulate the purchase, to judge whether they can bear with the cost in the long term, not to focus too much on sales. Ultimately, it is up to the government, I will leave the decision to them because right now, I feel that they are saving the leaves and branches, but they are missing out on the roots which are rotting away rapidly.


Credits -registrars