An Ounce Of Foreclosure Prevention Is Worth A Pound Of Cure

We all know that today’s foreclosure crisis isn’t going to last forever. Markets do come back. Expansion almost always follows recession. However, it will take time…a commodity that the soon to retire baby boomers do not have.

The soon to be retirees who are counting on the equity in their home to sustain them economically during their retirement may need to take massive preventive measures or go back to the drawing board for an alte
ative retirement income plan.

But they can’t do it alone. It is incumbent upon the financial community to step up to the plate and conduct a massive campaign on the financial products that can turn things around for the retiring boomers. The first of such campaigns should center on equity management.

Mortgage holders spend more time balancing their check books (in order to manage their money) than they do managing their biggest asset. Those who have not seen their equity completely eroded should look into an equity separation program. In many cases, such programs have the benefit of increasing the monthly cash flow of the homeowner while accelerating the mortgage payoff.

Politicians in Washington have already made it clear that it is not the government’s job to bail out those who are facing foreclosure. In a way they may be right. Financial professionals have an ethical duty to educate their clients on strategies that will not only result in massive damage control but also benefit those who are looking at retirement.

Many predict that we are only seeing the tip of the iceberg with the escalating foreclosure rate. They are right. If home values fall by another 20%, many more homeowners will owe more on their mortgage than their house is worth. If we go into an ‘official’ recession (that’s when the financial gurus agree that we’re in a recession) the number of job losses will force many people (who are not real estate speculators) to go into foreclosure. For those who are nearing retirement, that could be devastating.

The financial community needs to do a better job at helping the public understand that there is no safety of principal in home equity. Further, the return on equity is always zero. Home equity should be separated from the home. Then it can be invested in safe, liquid investments that will yield a rate of return. If people didn’t believe that a couple of years ago, I’m sure they get it now…especially as they watch equity erode across the country. Desperate times demand desperate measures…especially for boomers who don’t have much time to wait for the real estate market to bounce back.

If you’re looking at retirement in the next 10-15 years, you owe it to yourself to start managing your home equity (however little of it may be left) to avoid being a casualty in this financial epidemic.

For a more detailed discussion on your options, drop us an email at the website address below. Get with your Mortgage Planner today while programs are still available to manage your equity before it erodes completely. nnn