It's Worth A Try

With almost one million home owners receiving Notices of Pending Foreclosure filings in the 3rd quarter, the government led and lender supported efforts to prevent foreclosures are not working. With 1 in every 136 U.S. homes in foreclosure, the entire issue needs a fresh look.

Banks are postponing the actual foreclosure sales by the hundreds. Here in California, when the Notice of Default filing occurs, there is a 120 day wait before it is sold at auction. The lender can postpone the auction for up to 1 year without losing their position in the foreclosure process. Banks are postponing these auctions to give the Obama Plan, that being the loan modification program, time to work.

This morning on MSNBC they reported on another effort by the Fed’s wherein the defaulting homeowner is offered a rent back option to stay in the home, provided the homeowner signs a deed in lieu of foreclosure and the rental agreement. The Fed’s and the lenders are trying to do most anything to keep those houses occupied and off the market.

We know that a Short Sale affects a credit score (FICA score) about half as much as a foreclosure. How will a deed in lieu of foreclosure with a rent back affect their FICA score? I guess it depends upon how the lender reports it. And, I would look for some kind of favorable rating to come about to help insure that homeowners will be willing to rent the home that they formerly owned.

We know loan modifications don’t work, with 70% re-defaulting rates. We know foreclosures won’t work at the rate they are being filed.

Maybe renting homes back to the former owners will help keep prices from a further decline. It’s worth a try.