Obama Administration Taking Aim at Lenders Too Quick to Foreclose

There have been close to a million foreclosures so far in 2009. However, lenders are still refusing to lend.

Without new loans, homes sit empty, the market remains depressed, the banks do not collect mortgage dollars every month, and the cost of maintaining empty homes rises as time goes on. In some neighborhoods, foreclosed properties have been sitting vacant for 2 years or more. It is a lose-lose scenario for homeowners, banks and the overall economy. The best solution is to keep people in their homes.

Since lenders are still unwilling to work out long-term solutions for overall economic stability, the Obama Administration has decided to step up the pressure on lenders to do the right thing.

The new plan focuses on long-term solutions for troubled mortgages by extending trial loan periods and converting temporary agreements to permanent ones. It will achieve that with both incentives and penalties on lenders.

According to the U.S. Treasury, mortgage servicers "will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase."

Lenders "Failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions."

It remains apparent that our banking system and economy will not "correct" on its own. It never has. The "fed" has been manipulating interest rates for years in an effort to control the flow of money. However, our foreclosure crisis is beyond the reach of mere rate adjustments. It strikes at the core of the American lifestyle. The largest purchase most Americans make is a home. It can represent the bulk of their investment portfolio in the asset column. Take that away and what is left?

Stabilizing the housing market is by far the most important aspect of long term economic recovery. Assets equal wealth. Wealth equals power - and power creates jobs.