It seems that some are worried that the economic downturn of 2020 will lead to another execution crisis like the one we experienced after the housing crash a little over a decade ago. However, there is one important difference this time: a robust patient program.
During the 2006-2008 home crash, many felt that homeowners should be forced to pay off their mortgages despite the economic hardships they experienced. There was no empathy for the challenges these households faced. In 2009 Wall Street Journal article titled Is Walking Away From Your Mortgage Immoral?, John Courson, Prime Minister of the Mortgage Bankers Association, was asked to comment on those who do not pay their mortgage. He famously said:
“What about the message they will send to their family and their children?”
Courson suggested that people who can’t pay their mortgage are bad parents.
What resulted from that lack of empathy? Mounted executions.
This time it’s different. It was an immediate understanding that homeowners faced a challenge not self-made. The government quickly came in with a mortgage program that eased the financial burden on many homes. The program allowed many borrowers to discontinue their monthly mortgage payments until their economic status improved. It was the right thing to do.
What happens when tolerance programs are excited?
Some analysts worry that many homeowners will not be able to repay the arrears once their tolerant plans expire. They are worried that the situation will lead to an attack of executions.
The banks and the government have learned from the challenges the country experienced during the house crash. They don’t want an increase in executions again. That’s why they set up alternative ways homeowners can repay the money owed for a long time.
Another important difference is that unlike 2006-2008, today’s homeowners sit on a record amount of equality. That equality will enable them to sell their houses and leave with money instead of running through foreclosure.
The above-mentioned differences will cause us to avoid an increase in executions. Like Ivy Zelman, a highly respected thought leader on housing and CEO of Zelman & Associates, said:
“The probability that we will have an execution crisis again is about zero percent.”
Content previously posted in Keep Current Things