A moratorium is a temporary delay in the enforcement of a law or judicial decision. The action taken on June 27, 2009, by the United States Congress has been called “the most important foreclosure-related legislation since the Mortgage Meltdown and Great Recession” that started in 2008. In this article, we will talk about what it is and why it matters.
What is Foreclosure Moratorium?
It is a delay in the foreclosure of homeowner’s property. In other words, it is a delay of foreclosure proceedings, usually caused by legal action taken by the borrower to the lender. Foreclosure is not a judicial decree or law but is a common practice that can save homeowners from losing their homes. The homeowner may take legal action, such as filing bankruptcy or initiating legal actions against the bank or lending institution, in order to stop foreclosure.
What Happens During Foreclosure Moratorium?
During the foreclosure period, some banks and lenders do not sell the homes for money. This means that the property remains under the homeowner’s ownership, but the government takes responsibility for maintaining it. The homeowner, however, can not sell the property and move out during a foreclosure period. In many cases, the lender forecloses upon the loan immediately after the moratorium ends. This means that after a certain period of time, free from foreclosure notification, the lender activates foreclosure proceedings as if there had been no delay whatsoever.
When Foreclosure Moratorium Ends
Generally, under foreclosure terms, the lender takes into consideration the actual condition of the home. Some lenders may grant loans to homeowners that can no longer afford their mortgage payment during foreclosure periods. In other cases, however, banks fail to grant loans, and homeowners continue to receive threats or legal notices regarding foreclosure despite their action in putting a hold on their loan. Unfortunately, sometimes homeowners receive a new foreclosure notice after they had already filed bankruptcy, and this even causes loss of their home.
What Could Happen If Foreclosure Moratorium Is Not Enforced?
Laws Protecting Homeowners: The government has laws that protect the rights of citizens who have borrowed money from banks and other lending institutions. At times this protection can come at a cost, however. Some homeowners are unable to make payments or meet their mortgage obligations and need some time to save and find a new way to pay off their debt. Other homeowners have lost their jobs, been ill, or had other problems that made it impossible for them to continue with mortgage payments. In these situations, the government offers help in the form of a moratorium.
Economic Unfairness: If foreclosure is not enforced, there would be economic unfairness where banks and lending institutions would keep gaining by collecting money from customers who cannot pay but still have homes. These people would have to sell their property at a lower price to the banks, who, in turn, could still collect money from the difference.
Reduced Consumer Confidence: If banks and lenders are allowed to keep their customers’ homes through moratorium, this would severely reduce consumer confidence in banks and lending institutions. This loss of confidence would probably cause even more people to stop paying back loans and continue living for free on the property financed by others.
Why Does Foreclosure Moratorium Matter?
1. To lower house prices
Foreclosure offers a solution to housing problems stricken people. It lowers the burden of homeowners not only during foreclosure, but even after the period comes to an end.
2. More government funds are used
A homeowner that has stopped or delayed foreclosure decreases its burden by reducing the costs for maintaining a home. In many cities, for example, property taxes collected from homeowners can be used for maintenance costs of government buildings instead of being lost in unpaid taxes.
3. Some people can afford their payments again
For some people, a short mortgage moratorium period can solve the problem of being able to afford their loan payments. For example, a person may be able to make necessary changes in their life to regain financial stability.
4. Benefits for home buyers and sellers
A homeowner that is not going through the foreclosure process on its home can sell it at a lower price than most similar properties in the area. This means that buyers can afford properties more easily. However, a delay in the foreclosure process may allow cheaper properties to sell quicker.
5. Encourages saving
Foreclosure may encourage some homeowners to monitor their payments and save money in order to pay off the loan when they hear that they may lose their homes in a few weeks or months, even without discussing it with the lender.
6. Housing problems are reduced
With the help of foreclosure, homeowners can save a lot of money for things such as maintenance or repair so that their properties are better maintained and more secure.
7. Helps people recover from the Recession
Foreclosure can help prevent the decline of the entire economy because it can keep unemployment rates down.
8. Helps borrowers avoid foreclosure
Some banks or lending institutions give loans to homeowners that are not able to pay off their mortgages. These lenders may be more flexible with borrowers and set up a repayment plan based on the actual financial situation of each customer.
9. Helps banks and lenders work with customers
Foreclosure gives lenders the time to come up with better strategies for working with borrowers that are not able to pay off their loans.
10. Prevents long-term consequences
Foreclosure can prevent many long-term problems, like homelessness and financial instability, because the homeowner stays in their house during a certain period of time and thus can maintain their financial status.
11. Helps restore trust in the banks
Moratoriums can help restore the trust of homeowners who have had problems with their bank or mortgage lender over the years.
In conclusion, foreclosure is an important tool in solving problems related to housing. It can help save and protect homes and help preserve the wealth of a nation by maintaining economic stability. Although there are some legal issues related to the foreclosure, it works as a good temporary solution for both the homeowners and their banks or lending institutions. To get Florida Foreclosure help, contact foreclosure attorney Matthew Weidner at Weidner Law, 727-954-8752.