Monday, April 21, 2008

SubPrime Mortgages: The Crisis that Doesn’t End

Crises are rarely monolithic. There are always all kinds of reverberations … and a company (or industry!) that cares about its image and reputation will identify areas of vulnerability, address them proactively and communicate quickly and accurately. If they don’t, it’s likely the problems will continue.

Witness the subprime mortgage crisis.

As a direct result of this fiasco, federally chartered banks held more than $12 billion worth of foreclosed properties nationwide at the end of 2007, about 100 percent more than a year ago, according to a recent story in the Chicago Tribune.

In some parts of the country — where property values are low and there are dense concentrations of foreclosures — there are lenders who foreclose on the formerly overpriced subprime housing and evict the owners, but don't actually take title to the property, to avoid paying taxes on it.

According to some experts, this could create abandoned neighborhoods of boarded-up buildings. Remember the Bronx in the 1970s? Look for suburban neighborhoods to go that way in the future. And that may deal yet another blow to the reputation of the retail banking industry.

To stop this emerging blight and resulting reputation erosion, lenders must organize through their associations to lead the development of financing programs, either through government or private sources — if they can't support the programs themselves.

Action is required now if we are going to halt a wave that will have long-term negative economic impact and further weaken confidence in an important pillar of our society.

Technorati Tags: subprime mortgages crisis, crisis, federally chartered banks, foreclosed properties, Chicago Tribune, retail banking industry, reputation, economy, business, communications, public relations


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