Debt Consolidation

Considering the slowdown in the economy generally, the credit crunch, the meltdown of the subprime mortgage industry, and steep declines in real estate values, there is an increasing possibility of numerous bank failures. But for homeowners who are stuck in devalued homes or are facing a resetting payment or will be experiencing a financial hardship, hoping for a collapse of their mortgage company will probably not let them off the hook for paying the loan back.

In fact, in the event that bank failures are so severe in the coming months and years that there is simply no company to send the monthly payment to, homeowners should plan on saving as much as they can. Bill collectors have the longevity (and often the personality and appearance) of cockroaches — even after a nuclear attack or planetary disaster or economic crisis, they will shake off the dust and start doing what they have always done: harass people into sending them money for debts they never owned.

Also, even if the federal government takes over the failed lenders and begins the administration of the bank’s activities, the best that may happen is that the mortgage loan will be sold off to vulture buyers and the homeowners will have a new lender to send money to every month. For loans that are prime, the sale price may equal the value of the mortgage; for subprime loans, they may be sold at a discount to anyone interested (even for pennies on the dollar), but homeowners will be the last ones to know if their new mortgage company bought the loan for less than the total amount owed.

Homeowners who have loans through the largest banks have probably the least likelihood of seeing their mortgage simply erased due to a failure, but possibly the most danger if the lender does fail. The largest financial institutions have been designated by the government as “too big to fail,” and will be bailed out for as much as necessary to keep them going until the government itself needs to be bailed out or fails. However, some investors and customers may lose significant portions of the money they have invested with these banks, although mortgage clients will still have to continue paying as long as anyone is around to collect.

Bank failures were a common event during the Great Depression and runs on the banks were even more likely to happen during local or system-wide panics. These failures, however, did little to stop the largest banks from coming in, buying up mortgages from failed regional banks, foreclosing on farms and homeowners who were behind, and taking large portions of the country under their own control. When the supply of money dried up for average workers and families, only the banks could create enough money out of thin air and use it for their own purposes to ensure the poverty of the nation for a decade.

Regardless of how the banking system operates in the coming months, it is becoming clearer that one party to many mortgages must fail. Either homeowners and Americans will be going into foreclosure while bailing banks out, or the banks will have to fail but maybe fewer homeowners will end up losing their own homes. The only way the people can bail out these banks now is by massive inflation, which has been the Federal Reserve policy for, well, ever. Rising food, transportation, and materials prices due to a transfer of money from people to the banks will just cause more families to fall into foreclosure, which will require even more liquidity injections into the banking system.

In any event, the best that homeowners can do during difficult economic times is to plan for the future as much as possible. Keep paying the mortgage, save for a rainy day, and examine or help set up solutions to foreclosure in the community. Money is drying up for the average family, as banks refuse to lend and money transfers back into the hands of banks to pay off loans. As it dries up even further and the Fed gives the banks even more hundreds of millions of dollars, prices will continue to rise and homeowners will continue to fall behind. The best time to stop foreclosure is before missing a mortgage payment.

Nick writes for the ForeclosureFish. website, which gives homeowners the advice and resources they need to prevent foreclosure on their own and defend themselves against the bank’s lawsuit against them. The site describes numerous methods to save a home, including foreclosure loans, loss mitigation, stopping a sheriff sale, bankruptcy, and more. Visit the site here on the web: http://www.foreclosurefish.com/

Article Author :Nick_Adama

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