The intent of this post is not to condone the robo-signing foreclosures of the recent weeks, or the extreme securitizing of sub-prime mortgages that facilitated the financial crisis, but instead to examine the basic structure of mortgages and foreclosures, and to point out stark realities of how they work.
Mortgages are a loan, enabling the buying of a house without paying for the entire amount in cash up front. For this privilege, mortgage holders pay an interest rate to mortgage lenders. Ignoring ARM’s, floating rates, and the like, these interest rates simply account for the time value of money: money now is worth more than money later.
In the event that the mortgage lender is not receiving these interest payments, as well as principal payments, they have the ability to recoup their investment through foreclosure. A mortgage has a contract, and one of the rights it grants lenders is the ability to pursue foreclosure in the event of payment default.
I have absolutely no sympathy for those who complain about being foreclosed upon. You entered into a legal agreement. You did not hold up your end of the agreement. It is not unfair, discriminatory, or predatory that you are being foreclosed upon. It is solely your fault. So stop complaining and either improve yourself to get a better paying job or correctly evaluate your financial situation next time before signing a contract you couldn’t uphold.
That is all.
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