November 14, 2008

Bank Bailout Won’t Help Real Estate Foreclosure Crisis

Filed under: Uncategorized — americanforeclosures @ 11:41 pm

Here is a freely syndicated article about how the financial bailout plan is not going to help those facing foreclosure. The author says to be proactive and don’t wait for the government to bail you out.

It started slowly at $250 Billion, then gained momentum up to $500 and then $700 billion. But what was the government rescue supposed to do, and when will it help many of the foreclosure victims that gave it such a loud voice? Well, the answer is muddy at best, and downright ugly at its worst. Bottom line is that it might not help anyone in the midst of a foreclosure.

Just two weeks ago, I appeared on a special FOX News report as a national expert commenting on the US Government rescue package, and what it meant for homeowners facing foreclosure. Many people were both angry and confused about the rescue package. The honest truth is that there was nothing in that bill that was passed that will do anything directly for those facing foreclosure. It was instead designed to bolster the flagging economy by injecting cash into the banking system. Unfortunately, the banks won’t use it the way Congress is intending. Here’s a recent example:

It was announced this week that PNC Bank was buying National City Bank, who was ailing just like many of their recent competitors. But here’s what you didn’t hear: The deal was announced just hours after PNC Bank accepted $7.7 Billion of the governments handout from the rescue package. In other words, the deal would not have gotten done if the money wasn’t provided to them from the government through the bailout package.

So where’s the help for the guy on Mainstreet?

Buying up foreclosure properties through a government subsidy won’t help the average homeowner facing foreclosure. Instead, what will happen is that the banks will use the funds to “pawn off” their worst performing property loans or foreclosure acquisitions, and get the government to bail them out of those securities. Immediate relief will only come as homeowners push their financial institutions into taking action. So what do you do if you are facing foreclosure?

First, don’t wait for the government or even the bank to bail you out. It won’t happen, and by the time they seek you out – it’s too late. In Foreclosure Myths, I talk about several options on how to engage lenders in the “loss mitigation” process – or negotiating their losses. Even if your not an investor, you can implement the same strategies. It all comes down to the way it’s presented:

  1. Make sure you know the actual loan balance and true current value
  2. Get comparables from your local MLS or online system to verify similar properties that have sold within a 5 mile radius
  3. Take pictures of the property – inside and out – indicating the present condition, and what repairs will be necessary to bring the possible foreclosure property back up to saleable condition.
  4. Take pictures of the neighborhood – especially of other properties for sale on the same street. This indicates competition for the bank.
  5. Contact the financial institutions “Loss Mitigation” department – not the customer service dept. The customer service folks are trained and TOLD to tell you “no”!
  6. Prepare and present an offer for a “Short Pay” to the loss mitigation department, using the recent sales, foreclosure numbers, pictures, rehab and repair costs and everything else to illustrate that it is in their best interest to lower your balance and payment. They sasy that a picture is worth a thousand words – in this, case it worth thousadns more.

The fact is that many homeowners who are facing foreclosure, or likely to face foreclosure in the coming year, are waiting for the goverment to come to the rescue. The recent “bailout” rescue package won’t do it, and the funds that DO go to the financial institutions won’t wind up helping anyone looking at the road to foreclosure. Don’t sit around and be reactive – be proactive and start fixing the situation on your own.

The sooner we allow the real estate market to correct itself, the faster that prices will find a foundation, foreclosures will fall, and homeowners will see their values start to increase. More government assistance will only prolong the problem, and money will not get to the ones who truly need it.

Chip Cummings is a best-selling author who has written seven books, including his latest, “Foreclosure Myths” (Wiley, 2008) and his upcoming “Cashing In on Pre-Foreclosures and Short Sales” (Wiley, 2009).

Chip is a certified national trainer of real estate finance in 42 states, and speaks around the world on mortgage and real estate issues. He has appeared on FOX News, NBC, ABC, Fox Business and hundreds of television and radio shows. For more information or to have him speak at your event, you can find him at or call (616) 977-7900.


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