Does Anybody Want a Free Glass of Lemonade?
June 18th, 2009 categories: Just "My" Opinion
As I reviewed the Home Affordable Modification Program (HAMP) in more detail I thought of another analogy to help people understand the concept “Mortgage Forebearance”.
As a child my first business enterprise was a “Lemonade Stand” in front of my house.
I stood outside selling lemonade to people as they parked their cars and went to the beach near my house.
My stand look something very similar to the picture you see in this blog.
If you look real close to the picture you will see children standing in line with money and the very last boy in line is standing there without anything.
He appears to be looking for something. Maybe he thinks money will fall from the sky. I don’t know about you but I think he plans on asking for a free drink in the form of I.O.U.
Well a ” Mortgage Forebearance is also a form of an I.O. U. 
instead of Lemondade it’s your home.
Well back to my analogy. If I were the operator of this lemonade stand and I gave this boy a free glass of lemonade in the form of an I.O.U. what are the chances that I would collect my money after the glass is empty? Not very good. As a entrepreneur I expect those losses.
Now back to the homeowner who has to agree to a “Mortgage Forebearance” Let’s say this homeowner agrees to sign this I.O.U. with the bank and wants to sell his home in 5 years and the value of the home is less than the amount he has agreed to pay back to the bank in the form of the I.O.U. what is the banks chance of collecting on this I.O.U.
I think it is pretty much like the boy in the lemonade stand.
