Economists of all stripes, liberal and conservative, agree that the explosionforeclosure notice 2 of the housing bubble has had far-reaching consequences for every sector of the U.S. economy. The Great Recession really began as a housing crisis. Sub-prime lending with the backing of government sponsored organizations like Fannie Mae and Freddie Mac created a mountain of bad debt. This glut of housing credit was then securitized by Wall Street firms who allowed (intentionally or unintentionally) that bed debt to infect other areas of the economy. When borrowers defaulted on their mortgages, as they were set up to do by the unfair terms of their sub-prime contracts, all that bad debt that was being packaged and traded brought the rest of the economy to its knees.

Everyone lost money in this recession, including the banks. When the foreclosure epidemic spread around the housing market like wildfire, banks and others lenders were stuck eating all of those defaulted loans. The result was a marketplace wherein the lenders were as adversely affected by default as the buyers were. Real estate investors picked this landscape clean like buzzards, but what options were available to the normal homeowner?

If you’ve been hard hit by the financial downturn, you might be in hot water on your own mortgage. Before you get too far behind on your payments, risking foreclosure and ultimately repossession, try muscling your bank into rewriting the terms of your mortgage. The key is the make the terms of the new deal more financially attractive to the bank than a foreclosure – which isn’t actually all that difficult. Banks are wary of losing out in the whole foreclosure process as well. If your financial difficulties are not terminal or if they are potentially temporary, your lender may be willing to reduce your interest rate or extend your payment dates just to keep you writing checks. The way they see it, every dollar you pay them under the terms of the new loan is a dollar they wouldn’t get if they proceeded with foreclosure

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This is filed under Home Loans/ Mortgages.

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