Behind the new foreclosure freeze: The fear factor
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Conventional wisdom holds that Wall Street is driven by two emotions: greed and fear. Today we see the second of those -- the fear factor -- on public display, in the form of the latest effort to forestall foreclosures.
(Headline for those who missed it: ‘The Bush administration, trying to deal with a worsening housing slump, announced a new initiative today aimed at helping homeowners about to lose their homes. For qualified homeowners, it will put the foreclosure process on hold for 30 days.’)
Banks and lenders are afraid -- afraid of a deepening housing crisis, afraid of the political blowback, afraid of writing down more bad loans, and very, very afraid of being stuck owning foreclosed houses that are declining in value every day. The knife is still falling; banks and lenders do not want to catch it. But don’t take my word for it. I get my best stuff from the comment section:
DS: ‘Truly, the banks are scared. The are doing what they can in public relations spin to keep more American homeowners from handing them their keys. They don’t want more homeowners to say, ‘Thanks for the loan Wall Street, but we are moving.’ And I am sure once the market changes, the banks will be asking for the keys.’
jeff: ‘They know that owning these properties is the worst of the evils and ultimately destroys their balance sheets. If they can manage to find a way not to have to write off the loan and continue to receive payments then they won’t have big writeoffs.’
Todd: ‘ Ain’t going to work. It just ain’t. People do not want their home, which has severely declined in value.’
perks: ‘This has NOTHING to do with helping out buyers. It has EVERYTHING to do with the fact that the banks are so buried in defaults and foreclosures that they need the breathing room.’
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: L.A. Times