Where Does All the Money Go?

Where Does All the Money Go?Touring foreclosure properties can bring up a lot of emotions.  Sometimes seeing what a family leaves behind can be sad and other times seeing the condition of a home can make you angry.

Yesterday while showing Northern Virginia foreclosures we caught a glimpse of where thousands of dollars can go instead of toward the mortgage.  Rooms full of discarding magazines.  Suitcases full of magazines.  Bookshelves full of magazines.  With the cost of these magazines averaging about $6.00 a pop it didn’t take long to see at least one mortgage payment that had been spent at the local bookstore.

Looking at all of the money wasted in this home made me wonder about credit counseling.  Not the late night we can fix your credit type of counseling but true budgeting and accountability type of credit counseling.  How many families who are facing foreclosure are getting any type of help to look at where their money goes?  Actually the answer is fairly obvious, very few of them.  

Part of the new Foreclosure Prevention Act of 2008 included a provision for pre-foreclosure counseling funds:

“S. 2636 would help to keep struggling families in their homes by:

  ·     Increasing pre-foreclosure counseling funds.  Title III of S. 2636 would provide $200 million in additional funding that would help housing counselors continue their outreach to families at risk of foreclosure.  These added funds would help as many as 500,000 additional families connect with their mortgage servicer or lender to explore options that will keep them in their homes.”

This is one of the parts of the new Foreclosure Act of 2008 that makes good sense but there are some serious unanswered questions.

How are the lenders going to connect with homeowners to let them know about the service? 

Do the homeowners have to know to call to ask for help?  Are the lenders going to set up counseling centers in the areas hardest hit by foreclosures? 

Once an owner is in the counseling program will the lenders extend the timeframe before foreclosure to try and give them time to work out their finances?

The amount in the bill that was set aside for the counseling isn’t nearly enough to make an impact for the families who need help now.  However if the lenders and the housing counselors work hand in hand perhaps a few families might be able to stay in their homes and learn that spending thousands of dollars on magazines is not good money management.

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