By now many people in Hawaii have heard of the upcoming 5-month foreclosure moratorium that passed the House and is headed for the Senate. The basic gist of it is that it will prevent illegal foreclosures from being processed. However, what many are failing to realize is that only a tiny fraction of the foreclosures that are hitting Hawaii (recently ranked #11 nationwide in foreclosure filings per housing unit) are likely ‘illegal’. Almost all are a result of people not paying their mortgages. Now this could be for a variety of reasons — loss of income or employment, spiked monthly payments, personal or other financial hardship, etc., and I am sympathetic to all of them. These are tough times for many folks here in our beautiful state. But the net results is that the lenders aren’t looking to initiate a foreclosure if the payments are being made on time.
Back to the main problem, we have a ton of distressed housing inventory in the pipeline that needs to get processed — foreclosures, short sales, deeds-in-lieu, etc. Whatever the ultimate outcome is of each property, we need to get through this ‘shadow inventory’ before we can truly have a healthy Hawaii real estate market again.
So to shut down the entire system for five months? Well, I have hard time believing much good will come of it. I think in five months we’ll look back and wonder what was accomplished. Meanwhile, the distressed inventory will continue to pile up, delaying any housing market rebound.
Furthermore, what will Hawaii’s homeowners think who have duly continue to pay their mortgage every month while their next-door neighbor gets a free pass for five months, living for free? Isn’t resentment inevitable? How would you feel if you paid $2000+ every month while your neighbor is required to pay nothing on a similar size mortgage?
So I ask your opinions — what do you think of this moratorium? Is this good for you individually? Is it good for Hawaii overall? Aren’t there better options for people who truly have a legitimate case against their foreclosure instead of stopping the machine for a few rare instances?
Fred says
My take is that being that the banks have a large blame to take for making bad (in many cases fraudulent) loans by qualifying virtually anybody regardless of their ability to pay back AND being that this practice led to artificially high real estate prices AND being that the banks got their bailouts from the Federal Government…. Yes, individual states should take action to force the bankers to take loses they deserve. After all they made a boatload of money and payed their executives record high bonuses before, during and after the 2008 housing market collapse. As a matter of fact, states should force the lenders to restructure borrowers debts, reducing it below the market value of the asset so that home owners would have real equity and their payment would be more affordable. This would incentify borrowers to keep up with the mortgage, property tax, and other house payments while stabilizing the housing market which is still overpriced as we speak (May 2011).
peter klika says
Sadly, many people are claiming to analyze a law they have never read. You need to read the statue VERY carefully to understand precisely what it means. For example, it doesn’t just put a moratorium on “illegal” foreclosures. It requires borrowers and lenders to mediate before a foreclosure takes place if one of them elects. As for it’s effect on the market place; Realtors and bankers don’t like this law. I get that. But it corrects a big bias in the Hawaii foreclosure system that has favored lenders since 1874 when the original foreclosure law was passed. I am a retired real estate attorney who represented both borrowers and lenders and served as a bankruptcy trustee. The old Hawaii foreclosure law was so flawed a lender could actualyl foreclose on you without telling you what the loan balance was. This moratoriium brings some short term stability to a market that is in a free fall. Lenders won’t tell you that. I just did. Peter Klika, Esq. Kapaau, Hawaii
You really need to read this moratorium carefully line by line before you start telling people what it means. OK : “Realtors and bankers” don’t like this law. I’m shocked. How many realtors have read this law in its entirety and can claim to explain to a layman each provision? Aloha nui, Peter Kila, Esq.
I agree with every word written here. The banks received “BILLIONS” in bail-out money just to survive the inevitable shut down of the financial world…which we all know would have never happened. However, look at it from this point of view. Like most private businesses, if funds are depleted and costs are too great…what does the company do? File for bankruptcy protection or if all esle fails…close up shop and take the loss. But…with the banks…they needed money to remain afloat and in turn received huge amounts of money to do just that. I feel that maybe it would have been a better idea to let the banks close up shop and bite the dust just as was the case with millions of homeowners who fell victim to the financial meltdown and loss of employment but where lenders FAILED to offer adequate assistance in helping their customers remain in their homes. If you want to find out the HONEST TO GOODNESS truth to it all…I suggest you go to your local bookstore (not Borders) and pick up the DVD called “Inside Job”. Not the movie but the documentary about the financial crisis and how the big name banks all played this story out perfectly and where our own US Government knew well in advance that the would come where we would find ourselves in the position we are in today. It’ll make you sick, pissed off and downright mad. To think that investors and lenders all had their hands in the cookie jar taking their share of billions of dollars to help them keep their luxurious lifestyles while millions of home owners were losing their homes and being left without any help from the banks they paid their mortgages to. Banks have become far too powerful and corrupt and I feel the entire financial industry needs a huge makeover.