Mortgage Foreclosures: The Ethical Implications of Options and Legislation
By: Brady Copeman*
The effects of the residential mortgage crisis in the US continue to ripple in the economy. This paper explores the options available to borrowers in danger of foreclosure and the legislation passed to curb foreclosure problems. It analyzes the ethical implications of the legislation and reviews the responsibilities of residential mortgage borrowers and financial institutions.
The residential mortgage crisis is entering its fifth year in the United States. This paper will briefly explore the options that are available to borrowers in danger of foreclosure, the legislation that has been passed to attempt to curb the problems, and finally a discussion of the ethical implications and responsibilities of the enacted legislation, residential mortgage borrowers and financial institutions. Prior to my discussion of these topics, I provide a brief overview of the timeline from when a loan becomes delinquent to when it is in danger of foreclosure.
The following mortgage foreclosure timeline has been generalized for the sake of discussion. The process begins with the borrower missing a payment due the financial institution. From 15 to 30 days of this missed payment, the bank charges a late penalty on the payment and contacts the borrower to determine when payment is likely to be made. If the bank does not receive payment or a response between 45 and 60 days from the date of missed payment, a demand letter is sent out to the borrower stating that the mortgage is in default. The letter typically states which terms of the mortgage have been broken and gives a time period for the borrower to make right the default, typically 30 days.
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* Brady Copeman is a Unit Manager at Cohen Financial.
