Foreclosure: Who Will Profit?

Physics taught humanity a very basic principle: for every action, there is a reaction of equal proportion. The same principle applies in the recent economic recession, particularly when examining residential foreclosure. For every home lost to foreclosure, some entity had acquired profit of equal proportion.

Three main groups profited the most from the foreclosure crisis: financial institutions, politicians and fraudulent characters. Each group benefited in a different way. There were economic and political profits in addition to gaining access to professional fields of employment.

The first group, financial institution, made the most economic gains. Acting to save the American economy from an intrusive recession, the United States Congress passed stimulus packages enabling financial institutions to access federal loans. At the same time, financial institutions were not forced to pass on benefits of the stimulus packages to distressed borrowers. The federal government passed some directives – such as HAFA – but participation was left to volunteer bases.

Politicians, the second group, made important gains. During the 2008 Elections, Democrats used the economic recession to attack Republicans in the congress and the White House. The strategy worked as election results showed complete domination of the Democrats over the Federal government. In addition, many politicians attached riders to stimulus packages bringing benefits to their local voters. Politicians made also good business allies. Politicians voted for stimulus package benefiting businesses, and in return, businesses made contributions to political election campaigns.

The last group, fraudulent characters, used the foreclosure crisis to erode away requirements to professional careers. Many took on the role of “Foreclosure Assistant Professionals”. Both the legal and real estate professions suffered the most from such actions. In addition to negative advertisement, politicians utilized the moment to protect the financial industry – their main financial contributors – from legal actions by attorneys. For example, California Senate enacted California Civil Code 2945 to limit the role of real estate professionals in assisting homeowners facing foreclosure.

It is very ironic to profit from others’ miseries. Distressed borrowers require balanced regulations reinforced by federal authority. Politicians ought to satisfy constituents’ needs instead of politicians looking to guarantee their reelection campaign funds. As for fraudulent characters, strict laws and fines can curb their influence. Finally, lawyers are the only guarantee to assist distressed borrowers because professionals are attached to performance.