n my post yesterday, I commented on the practice of purchasing a second home with the intention of walking away from the first one.

While I do not condone that particular activity, I do understand people’s desperation. With a lot of the media focusing on work out activities, you would think that we are really helping homeowners stay in their homes, and avoid foreclosures.
The fact is, that it hasn’t changed.
The State Foreclosure Prevention Group released their second study to see what effects government efforts are having. The results: No change.
This second report which looks at subprime loan servicing from Oct 2007-January 2008, found that despite servicers and government assistance, rates are unchanged.
The findings are:
  1. 7 out of 10 facing foreclosure are still not in any type of work out process.
  2. Loss mitigation departments are unable to manage their current workload. Any real estate agent who has attempted a short sale in the past few months, including myself, can tell you that the wait can be months.
  3. More loan servicers are directing homeowners towards loan modification rather than loss mitigation.

In January 2008 there were 25.44% subprime loans in the loss mitigation departments, compared with 20.56% in October of 2007. The percentages facing foreclosure vs. workout remained unchanged as well.

I have to say that I am not at all surprised by this finding. The fact that remains is that there are always people who don’t have the means for home ownership, as much as we want that to be true. Some people never learned how to handle finances. Just because they now own a home doesn’t mean that they suddenly learned how to balance a checkbook.

While the economy is cyclic, human behavior is relatively predictable when considered en masse. We are just spinning our wheels trying to work out something that shouldn’t have started in the first place. Loss Mitigation departments are so overwhelmed that they are unable to help the “salvageable” situations.

Our society has been one of easy money in the form of credit cards, for a long time now. The art of living within our means is not an easy concept for many Americans to understand. This lack of understanding indicates to me that no matter how many programs we throw out there, there will be those that just can’t grasp how to manage a home and the finances associated with it. As a real estate agent, I do value and promote home ownership, but we can’t do that at all costs.

The cost to all members of society is too great this time.

(c) Copyright, 2008. Melina Tomson, All Rights Reserved. DO NOT COPY this without express written permission from the author.

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