Avoiding Foreclosure- It Ain’t About the Cable
When you read articles about how to avoid foreclosure, you’ll often hear some genius from a non-profit saying something brilliant like, “We tell them- you’ve gotta get rid of the cable!” Nevermind that cable is probably one of the cheapest forms of entertainment.
Quite frankly, on a thorough financial review, there are typically 4-6 other opportunities to fix a budget without having to resort to a bare-bones lifestyle. These changes generally have more impact on the bottom line, and are certainly more sustainable than giving up the television.
In the desperate state of a homeowner who’s trying to avoid foreclosure, they’ll often agree to just about anything just to get their house back. The difficulty lies in the fact that commitments made under duress are often not well-considered, much less kept.
Here’s the reality of the situation: if you need to cut your cable off to keep your home, you’re probably going to lose your home.
Why?
Because if there’s that little wiggle room in your budget, then the next “surprise” that life hands you will blow you right out of the water.
People are not beasts, and most cannot tolerate a spartan lifestyle indefinitely. It’s one thing to “cut the cable” temporarily as a short-term measure, but if you have to lead a subsistence-level existence in order to avoid foreclosure and keep your home, you’re not gonna last.
This is just ONE of the reasons why the recidivism rate on loan modifications is so ridiculously high. Know-nothing staff at non-profit organizations who don’t really have solid experience in turning around a budget crisis, much less having lived through it.
There’s absolutely no excuse for a 50% failure rate on loan modifications and while all the froth lately has been about “helping homeowners to avoid foreclosure,” the focus OUGHT to be on “How do we prevent re-defaults?”
The confounding thing for me is that while the industry continues to major in minors, and is incessantly searching for the holy grail of “streamlined loan modifications,” they’re completely missing the point.
This is like spending all your time trying to get internet traffic before you have an effective conversion model in place. There’s absolutely no point in trying to find a way help (hurt?) more homeowners, more quickly, if your failure rate is that high.
That said, it’s not the mortgage company’s job to counsel people on their finances. Their job is to collect a debt. The information they typically gather in the process of a loan modification review is not analyzed for the purposes of improving the homeowner’s lifestyle.
The budget is not scrutinized to extract the maximimum value of the dollars that are available. They’re not going through those budgets with a fine-toothed comb and looking into every nook and cranny of the income and expenses to find every possible advantage for the borrower.
And, quite frankly, if they DID do this, they’d probably find a way to suck these found dollars out of the homeowners’ pockets, weakening them even further.
Nonsensical statements like, “Dude, cut your cable!” are the financial equivalent of a caveman’s club, when a scalpel will do a much better job, yielding a better return without weakening the “patient.”
IF we’re truly interested in helping more homeowners to avoid foreclosure for the long-term through loan modification, we need to start applying a bit more intelligence to this process, and we need to start working on the back end of the process, not the front end.
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