How Our Government Leaders and Investment Bankers are Like Homeowners in Foreclosure
One thing that I’ve noticed about homeowners who are trying to avoid foreclosure is that they commonly have a long denial phase. And the deeper they get into the foreclosure process, the more likely they are to slip back into that denial. They often make very poor decisions along the way, all in the name of maintaining the (previous) status quo, and trying to avoid foreclosure.
The actions they take in the name of “avoiding foreclosure” often make their situation worse in the end. The things they do to keep their homes often weaken them, financially, and make it less likely that they’ll have their home for the long term.
There’s a very good reason why (more than?) 50% of all loan modifications end up back in default.
I’ve been watching our government leaders, and listening to the Wall Street executives, and I’ve noticed that they’re acting no differently than a typical homeowner who’s trying to avoid foreclosure.
Nearly every major move that they’ve made has been myopic in nature. Many of the things they’ve done to “avoid crisis” will, in the end, be the very things that drive us into disaster.
Even Harry Reid says, “Nobody knows what to do.” While he’s been criticized for making this statement, it just may be the most honest characterization of this situation.
One of the things that I’ve often said is that the fundamental mistake that loss mitigation departments make is to expect logical, rational behavior from homeowners in crisis. Believe it or not, the mortgage payment is NOT the only concern for a borrower who’s behind on his mortgage.
His delinquent mortgage is not the CAUSE of his problems, it’s a SYMPTOM of his problems.
And with the stress he’s under, intelligent decision-making becomes difficult to downright impossible.
Much the same, the foreclosure crisis is not the root cause of our problems. There’s still an overwhelming sentiment that “We have to stop the decline in housing prices.”
Why? Oh, that’s right… “to avoid a systemic crisis,” as Senator Schumer put it recently.
Mortgage and banking executives, along with our political leaders, are in deep, deep denial. They’re in the same shoes as the homeowners who are falling behind on payments, and they’re acting in exactly the same manner.
At some point, if you hope to avoid foreclosure, you have to snap out of it, clear your head, HONESTLY assess your situation, and THEN take decisive, intelligent action.
And for many homeowners, the intelligent solution is NOT to keep their home.
In the same way, perhaps the solution that’s best for our country is NOT to “preserve the system” that we currently have.
Instead of working to save what we have, our leaders need to snap out of it, and find a new way.
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