Foreclosure Stigma Won’t LastMarch 9, 2010
In a recent article, Inman News reported that foreclosed borrowers may get loans again. Inman reported that “Banks haven’t been very forthcoming on this issue. However, knowledgeable observers of the situation say that while it may take some time, the situation will right itself for most people.”
I have said it before – you cannot shut out a majority of homeowners who have been making loan payments for years but due to economic crisis and financial downturns have experienced a severe loss of income and ability to pay on their mortgage debts. So many individuals have found themselves in a position that they never believed possible and they are sincerely remorseful. Foreclosure for these borrowers was quite simply, a method of survival.
When the economy recovers – and it will, these borrowers will be the prime people to consider for new loans. Why? Because they have jobs, have been making timely rental payments and will (if smart) have saved a sufficient amount for a 20% down payment. They will be a good risk next time because they will be smarter about their ability to repay their debt.
I predict the banks will charge repentant borrowers a higher rate of interest (because they can) and because this particular borrower will be so pleased to have a loan that they will be willing to pay a higher interest rate for the opportunity to be a homeowner once again.
As Inman reports “The lender who figures out how to do more of this case-by-case stuff cost-effectively is going to end up ahead of the pack,” Riegler says.
You simply cannot pass up on this (formerly foreclosed) borrower of the future – there are simply TOO MANY of them and they will need a loan and a place to live. They are going to be the buyers of tomorrow. The dream of homeownership lives on…