mortagesandforeclosures

Why the Current Business Model is Corrosive and Obsolete, and How it Can Be ImprovedAt the root of the current financial meltdown, there is the mortgage crisis. At the root of the mortgage crisis, there is a business process that has become as obsolete as 8-Track tapes.Under what business model is it desirable or even rational to increase one's inventory of an unpopular product, and increase one's business liabilities, while simultaneously shutting down a revenue stream? Sounds crazy, doesn't it? Yet the model described is exactly what mortgage bankers
?are doing every time they foreclose on a home.According to the National Association of Realtors, home sales are down 7.1 percent from last year, which was not a banner year itself. In addition, for the homes that were sold, the price was down 12.4 percent from last year. Those figures should demonstrate, quite clearly, that existing homes are not a hot commodity, and will be difficult to sell, once obtained.Having taken custody of the home, the bank is now liable for any taxes, utilities, and upkeep, increasing the liabilities on its books. Many banks will, of course, choose to keep only the taxes current, opting to shut off electricity, gas and water. Such a bank had better be sure the house is in a Southern climate. In a Northern climate, if neglected, water pipes will freeze, and often rupture, dragging the resale value of that home down to the level of its flooded basement. Additionally, in order to limit their financial liability, the bank will, in all likelihood, neglect the property allowing its value to decline regardless of other circumstances.So now the bank has taken in additional inventory of a product whose sales are down, they have increased their liability for payments out, and they have removed the only potential revenue stream associated with that property, the former "owners".The argument, from the bank's point of view, is that the former owners were unable to keep up with their mortgage payments. This is an entirely valid argument if, and only if, that family could pay no part of their mortgage.A New Business Model for the Mortgage Crisis

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