No More Mortgages for Detroit and Suburbs?

On February 3, 2009, the Head Sheriff of Wayne County Michigan (Warren Evans) announced that he is stopping all foreclosures in the County until further notice. This includes Detroit and the surrounding suburbs which have the highest unemployment rate in the Nation at over 10% (and rising). His intentions are good, but there are unintended consequences that will likely make the situation worse!

Why? Within a few days of his announcement, more and more lenders have announced that they will no longer offer mortgages in Wayne County. Can you blame them? They don't want to make new loans if they have no recourse to foreclose in the case of a default. How long will this last? We don't know yet, but hopefully not long in my opinion. If people cannot get a mortgage to buy a home in Wayne County, then sales will drop dramatically. Fewer buyers will mean that property values will decline at an even faste rate than they are now. What's worse is that this will hurt the value of all properties in the County which have already been badly beaten down. It's possible to buy a nice, 3BR brick home in Detroit for $15,000 or even less. These are nice homes!

Until the Sheriff resumes foreclosures, these defaults may just pile up. Lenders will be forced to expand other alternatives such as Forebearances and Loan Modifications. That's great as long as it provides a long-term solution. Let's hope it does until the Sheriff wakes up and realizes he is making the problem worse, not better.

David Smith, President

Umoveon LLC, Foreclosure Solutions

www.umoveon.com