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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?