Effects of the Foreclosure Moratorium in Wayne County

Sheriff Evans of Wayne County Michigan announced to Michigan that he was halting all mortgage foreclosure sales. His reasoning is that it is impossible for his office to tell which of the mortgages were protected under the Troubled Asset Relief Program allowing homeowners adequate time to work out loan modifications.

I would like to bring to everyone’s attention that Sheriff Evans is running for Major in the City of Detroit so I think this is a publicity stunt. I also wonder if he has considered the financial impact of his decision on the community. I know most people get a warm and fuzzy thinking about homeowners staying in their home and saving their house but I’m not one of them.

I have a significant amount of experience with short sales and loan modifications and it has been my experience that most people are not capable of making any considerable payments towards their mortgage. Most people have had something catastrophic happen that stopped them from being able to pay their mortgage. There is no loan modification program in the world that fixes a lost job, divorce, or death in the family. Often their debt to income ratio is so poor that a foreclosure now is better than a loan modification that ends up in foreclosure in the near future.

What real value is there in prolonging the inevitable and forcing more losses on lenders already in dire straits (yes I know it was their own fault and I won’t get in to that now)? Especially sense these lender/bank losses are being subsidized by the Federal government via the bail out. The only value I see is that it makes the politicians look like they really care. This is a publicity stunt with your tax dollars so you can feel like your government is working on the problem.

If the Moratorium on foreclosures continues for any great length of time, it will actually create larger problems than we already have. The banks are all ready overwhelmed with foreclosed properties and can barely keep up. One of the main factors in the recent drop in property values is the enormous supply for houses and the lack of demand (people can’t get loans) for them. This naturally forces values to drop.

If we stop foreclosing on houses and we know that most of the loan modifications will be unsuccessful resulting in more foreclosures; we in essence dammed a river. When the moratorium is over, we will have a flood of foreclosures further wiping out property values and creating even more problems.

My question to you is would you rather have a little bit of rain for a few years or do you want some sunny days followed by a devastating flood that destroys your home? This seems like a rhetorical question and I find few people thinking about the long term consequences. Short term profit and thinking is the major contributing factor to the mess we are currently in. And here we are, about to repeat our mistakes.

These are the people many of us are trusting with our retirement. If that is you, I would think again.

Make Your Life Uncomfortable,
Jeremy Burgess
The Detroit Market Expert
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