I know it’s unusual for a foreclosure expert to stress that what we need in order to make the real estate market work properly now is a mortgage relief plan that really delivers the goods, but I will explain why I say this.

Foreclosures, as I have noted in countless articles and speeches across the country, are a balancing mechanism that is an integral part of the mechanics of our real estate system and our economy. As a percentage of home owners, foreclosures, are always going to be there because the mechanism does a number of things automatically:

1. It stops the real estate market from overheating by increasing the number of foreclosures, organically, as more houses are bought and sold and some, inevitably, will fall foul of the requirements and be unable to keep their home.

2. It releases new money into the system and the economy stopping loaned money from becoming gridlocked in a property that the owner cannot afford to keep and which is going nowhere.

3. It allows houses which have been gridlocked and are ‘dying’ to come back into the real estate market and be sold at affordable prices which to new owners pursuing the great American Dream of owning your own home.

As I mentioned before the moment this mechanism gets flooded with more foreclosures than the system is supposed to produce it stops working properly and begins to cause imbalances in the real estate market that do more harm than good to the industry as a whole.

Proposed relief plans which will supposedly freeze Adjustable Rate Mortgages (ARMs) so that those who might not be able to afford them will actually be able to do to so and will not lose their home do not go far enough.

Let’s take Corona in California, where the mortgage-relief plan being pushed by the government is supposed to help debt-laden homeowners across America. But it’s creating dashed hopes and fresh tensions in this city that mushroomed during the subprime-lending boom.

The problem is that the lending occurred in a very indiscriminate and predatory way which effectively removed many of the criteria for lending while the rescue plan that’s being proposed comes with a stringent set of criteria many of the most needy home owners will simply not be able to meet.

Nationwide, California is among the leaders in foreclosure filings this year. It notched state-record highs for default notices and homes lost to lenders in the June-to-September quarter, according to DataQuick Information Systems, a La Jolla, Calif., real-estate research firm.
The time has come to put together a mortgage relief plan that actually provides mortgage relief. Then and only then will the foreclosures we see work as the organic, balancing mechanism we know and start to provide real value in our real estate economy.

It’s true what they say. Money really does make the world go round and the lack of it can threaten to bring the world to a standstill. In recent months the global credit crunch has made banks unwilling to lend to each other which means that they have been even less willing to lend to consumers and this has led to a tightening up of the money available to do anything.

This kind of situation is exactly what can potentially bring about a recession, a shrinkage of global markets and a reversal of the progress we have made through globalization. Because the potential risk has been so great it goes without saying that the world’s greatest banks would do something about it.

Sure enough The Fed, the Bank of England, the European Central Bank and the national banks of Canada and Switzerland have banded together to put in more than $100 billion into the world monetary system.

The result of such action is a speeding up of the sluggish world economy which means that in terms of real estate the green light is back on. Real estate is a funny business because in order to work right it requires two things: new home buyers and foreclosures. New home buyers are required because they are the lifeblood of the system. Foreclosures are needed because they help keep things in control.

Foreclosures are a balancing mechanism that unlocks ‘dead money’ and puts it back in circulation, revitalizes the market and helps to create fresh supply and demand where before you had a deadlocked situation between a borrower and a lender with the only potential outcome the lender taking control of a property and spending a lot of money trying to sell it at a loss.

The credit crunch that we were experiencing was affecting man lenders and lending institutions and, in its international outlook, was stopping overseas investors from pouring in money that could jumpstart the sluggish U.S. housing market.

All this is now set to change. While it may be a brief while before we experience a really positive outlook in real estate again, 2008 looks set to be a seminal year in terms of the real estate market and foreclosures in particular.

The tightening of credit we experienced has led to a pruning of bad practices and bad lending accounts and the fall out has actually benefited the market as a whole. This means that we are now ready to turn a new leaf having learnt from the mistakes of the past and foreclosures can once again become to golden wedge helping to open up new areas of real estate and attract new home buyers into the market.