As I was checking my stock portfolio I saw a news story about the decline in real estate prices. So I reviewed some data in the Standard & Poor's/Case-Shiller home price index - while the overall news on the surface seems bleak it actually provides some relief. Home prices have retreated but only to those of about 2 -1/2 years ago. While no one likes to see a decline in the value of their home this is really just a settling of the market.
Lenders would be wise to work with borrowers to overcome this momentary state in the market. Reworking loan terms to delay rate increases or allowing borrowers to skip some payments with small penalties with balances carried to the end of their loan terms. This would ease some of the fears, help get these borrowers back on track and provide for longer term gain since borrowers will not have their credit histories ruined for 7 to 10 years.
While it is true that many borrowers either did not read the fine print or thought they would be in a better position than they are now, there is more benefit to society through negotiation versus litigation.
The good news is that Real Estate, over time will always have value and increase in value.
