HOW TO REDUCE FORECLOSURES & UNEMPLOYMENT

I reposted this blog entry, after being asked to condense it for the Broomfield Enterprise.

Dear President Obama and America’s banking leaders. While the nation's banks are receiving billions of dollars of bailout money with no real accountability, here's an idea that might help reduce foreclosures and the unemployment rate simultaneously.

The problem is that there are too many foreclosures and the process for handling them is too slow. The solution is to utilize talented unemployed people to speed up the process.

According to Realty Trac, there are currently 2.3 million foreclosures in the United States that are devastating our economy. Foreclosures are a cancerous blight that devalue surrounding homes and create a downward spiral for the entire market. So, in order to achieve any real recovery, we need to purge the market of as many foreclosures as possible, and fast. But here’s the problem. It takes approximately 6-12 months (sometimes longer) to push each one of these distressed properties through the banking and legal system. So, how will we ever push 2.3 million of these “toxic assets” through the system fast enough to turn the market around? Why are the banks so slow and how do we speed up the process?

When a home owner becomes delinquent on their mortgage, the bank has to evaluate the situation to determine whether they should proceed with a legal foreclosure or take a loss on the property. The bank has every right to foreclose, but a legal foreclosure is the longer and more costly road for all parties. The banks would be better served to cut their losses quickly and move on to the next case.

But here’s where the banks get stuck. The bank who holds the mortgage is usually not the original lender and is typically located out of state, lacking first hand knowledge of both the owner’s situation and the true market value of the property. The bank passes papers from department to department, all in the name of “loss mitigation”, when in truth, all of these people have very limited knowledge or accountability. This creates enormous inefficiencies and bad decision making.

So let’s get to work. Unemployment is now over 7%. Here is a ready, willing, and seasoned workforce, many with excellent accounting, finance, mortgage, and real estate experience. Using the economic stimulus money, the banks should hire experienced, knowledgeable people to oversee the foreclosure process. But the key is to assign one experienced, knowledgeable individual to each case, who can analyze the situation quickly, negotiate, and make an intelligent decision on behalf of the bank. It seems counter-intuitive that assigning one person per transaction could be more efficient, but a knowledgeable expert, who is accountable to the bank, can make smarter decisions faster, advise the bank about risks and liabilities, and actually push transactions through faster. This would speed up the process tremendously and put lots of people to work.

As Einstein said, ‘you can’t solve a problem by using the same kind of thinking that created it’. Americans are an innovative breed, so let’s innovate a better solution.
Chip Bruss
Colorado Real Estate Broker