Anyone Have a Keebler Elf to Lend?


Right now the Keebler elves are busily striping cookies with fudge, running around with wheelbarrows full of tiny concoctions of snack goodness, frolicking in cocoa streams and in general, being cute little industrious spritely creatures. While the rest of us are slaving away in our various jobs, doing important things, keeping our customers happy, the little elves are turning handsprings and playing with frosting. Happy little people, how we envy you!

A few days ago I read the financial section of the Oregonian and found it very interesting to see how the media and government officials view the current situation with foreclosures. Despite the best efforts of many, lenders are still foreclosing on properties and are not modifying sufficient numbers of mortgages. The delays in the process, whether it is with short sales or modifications, is causing all kinds of problems. There is outrage. There is frustration. There is desperation. What is lacking is perspective and common sense.

What I think many are failing to understand is that Banks, like any business, need to pursue policies that are in the best interest of the Bank. In other words, if it is more beneficial to foreclose on a property than to modify a mortgage or to agree to a short sale, that is the likely course the Bank is going to take. When better than 60% of all consumers that pursue modifications end up behind on their adjusted payments six months later I can only conclude that modifications themselves are not working.

Both the Obama and Bush administrations have asked Banks to pay down principal balances on loans and modify the terms of existing loans when consumers are having a difficult time repaying their debt. I understand the reasoning and logic behind the policy: the more foreclosures enter the market the more that housing prices will decline and the more pressure will be placed on a system that is already under stress. I know there are a lot of people out there right now that are angry at Banks and would like to blame current hardships and challenges on the Banks themselves. Any lender that grants credit to consumers must do so with the understanding that there is no way to predict the future. The unemployment rate is the biggest issue we all face at this time. Until we have less people out of work no amount of modifications will solve the underlying economic issues we face.

If only the Keebler elves could work their magic with the Banks. Underperforming portfolio? Borrowers underwater with values? With a flick of the wand everything would be fixed and working properly. Angry consumers? Illogical legislation and government policies? Bring in the wheelbarrow of magical sprinkles and we’re good to go. Unfortunately there is no magic. It’s going to take time for things to improve. Hang in there friends.

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4 thoughts on “Anyone Have a Keebler Elf to Lend?

  1. Very good reading Mark, I love the Keebler analogy. You are right, we just have to hang in there, it is going to be a rough go of it. This last quarter should be an interesting one…

  2. Great points Mark. It’s always frustrating to see people be so upset at the banks for not modifying the loan. It seems many have forgotten that they promised to pay it back. Oh well, now I am hungry. Going for some striped shortbread cookies!!!

    1. Hey Ken! Thanks for checking out the blog. I was also thinking about the parallel universe analogy – in other words, imagine that everyone’s wages had gone up. Would it be fair for the bank to increase the loan payments since the consumer was now making more than what they originally made when applying for the loan? Or what if equity in the property was up by a bunch and customers were flush with equity instead of being upside down? Would it be fair for the bank to ask for a portion of the gain? Just food for thought. . . .

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