Here is an interesting article from Market Watch. It says that as much as 25% of foreclosures are from people that can afford thier payments. Check this out:
Here are a few of my thoughts about the article.
With 25% of defaults are made by people that can "afford" their payments. These people are taking a calculated loss approach to their equity, credit, and housing. I can't say if they are right or wrong.
Many don't have another option. They can afford rent. Probably can sustain the hit to their credit for a few years too. Who knows there may be amnesty in the future.
Many banks are taking the Jessie James (of West Coast Chopper fame) approach with their customers. Jessie James has a "Pay Up Sucker" tatoo on the palm of his right hand.
Doesn't matter what the rate is. Doesn't matter what the property value is. Doesn't matter that the neighbor hasn't made a payment in 10 months and is still in the property.
Hopefully the federal TARP for loan mod programs will give these people another option. Get a loan mod to lower their loan balance and payment. The borrower stays in the house. The lender continues to get payments. No foreclosure, no further excessive devaluation of the property. The bank gets some relief.
Lenders currently offering voluntary loan mods to their customers are showing a much lower foreclosure rate that the JJ lenders. Many have learned throughout this process that it makes better scenes to mod than kicking the customer to the curb.
I have even seen commercial lenders in the market place trying this approach with heavily leveraged commercial property owner. Mod the rents, mod the payments, mod the loan. Again a more equitable solution than taking the property.
And a better use of federal funds than creating bigger government. (No offense to Jessie James)
What do you think?
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