Foreclosure and Real Estate Blogs

“The mounting crisis has forced Mr. Bernanke, a former professor of economics, to discard the sanguine view of the nation’s economic health that he expressed last summer. He has also abandoned his skepticism about the need to calm financial markets and set aside his concerns about the “moral hazard” of bailing out big financial institutions.”
From the NY Times

Why is gold rising in price?  Gold is a classic hedge against inflation.  Why are people concerned about inflation?  Because the Fed keeps cutting interest rates to stave off recession.  Why is there a threat of recession?  Because the Fed allowed Wall Street to binge on crappy mortgage lending practices.

The party’s over, so now who gets to support the big Wall Street failures?  The taxpayers.

I’ve seen this published in several places, it seems like a growing trend due to the increase in distressed homeowners.

“Many homeowners facing financial difficulties used to look to home equity as a resource to cover shortfalls. But with that option off the table for many, increasing numbers of people are considering tapping into a second large asset — retirement savings.”
From SeattlePI.com

There’s a saying about the inadvisability of throwing good money after bad, it’s pretty appropriate in this situation.  401k’s are a retirement vehicle, and there are significant penalties for early withdrawals, even in a hardship situation.  You can often borrow against the 401k, but should you?
If a foreclosure process is imminent, the borrower really needs to take a strong look at their finances, the property and their loan(s), and the real estate market in their area.  If there isn’t enough money coming into the household to be able to make the payments, foreclosure is inevitable.  If a job loss caused the default, is the expectation of new employment realistic, or is it just hope?  The use of retirement money to buy a few more months probably isn’t the wisest choice in this type of situation.  On the other hand, if there was a financial setback that has since been resolved, then the thing to do is talk to the lender about a forbearance plan.  It’s a much cheaper solution than using retirements funds.

If there’s been a financial setback, and the local real estate market has dropped in value, there is no point in using retirement funds to stave off foreclosure.  It will take years for many markets to recover some of the losses, buying a few months more time with 401k funds probably won’t get enough time to allow for market recovery.

Hard choices, but retirement funds should be left for retirement, using them to delay foreclosure for some time period really does fit the “good money after bad” concept you should be avoiding.