Bank Foreclosed Homes

Bank foreclosed homes are becoming a larger than life feature on the housing market today. As more and more banks foreclose on properties that have fallen into default we see a rising number of houses reversing to bank ownership. As these home enter the banking system the banks actually have no effective way of dealing with large numbers of property so they sit. The longer these bank foreclosed homes are allowed to sit on inventory the more of the banks useable funds are diverted away from banking activity and forced to be tied up into the real estate and the less actual banking activity can actually happen.

What that means in layperson terms is that the longer the bank sits on property the less likely it is that the bank is going to stay in business. Banks are in the money business and not the property business. In order for a bank to remain a viable entity it needs to loan money and extend credit to people, which will generate interest payments. Having a large backlog of real estate that the bank owns and it holding will not generate income for the bank and will spell financial disaster for the bank and the community that it serves.

As the amount of bank foreclosed homes increase the structure of the institution begins to destabilize which will cast shadows and financial hardships on the community where the bank is located. Jobs will begin to be lost and since there is little or no free money to flow from the bank into the businesses and to extend credit to the people of the community, there is less money transferring and as a direct result, the businesses begin to close and that increases the jobless rate which will inevitably increase the amount of dollars spent at the retail level so prices will increase and as people lose all of this the number of homes facing foreclosure will increase and the cycle begins again until the spiral ends in economic disaster.

There is no quick and easy answer to stopping the progression of the cycle and there is no overnight solution. It is going to be a long hard climb back from the bottom of the hole that we have dug ourselves into. But we have to start the reversal if we ever intend to get the economy started back in the right direction and unfortunately, we can’t depend on the government to make sure that happens for us. We as individual people have to take responsible control of our own finances and do the right thing for our own economy. We need to stop the extraneous spending on frivolity and divert that cash towards paying down the plastic debt and maintaining our own mortgage and making sure that we keep an eye on our own problems and financial issues. Only then will we be able to begin to turn the crisis and begin to see the rewards of our actions and that coupled with the actions of the banks and government can allow us to make it through.

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