help for housing?
The New York Times editorial page
says there will be no recovery in jobs or the economy in general until
housing recovers, and that ain't gonna happen anytime soon without
Tens of millions of Americans are being crushed by the overhang of
mortgage debt. And Congress and the White House have yet to figure out
that the economy will not recover until housing recovers — and that
won’t happen without a robust effort to curb foreclosures by modifying
troubled mortgage loans.
Reducing principal is a better solution than lowering interest rates,
because it reduces payments and restores equity. Bankers resist, because
it could force them to recognize losses they would prefer to delay. The
administration has resisted, in part because principal reductions are
seen as rewarding reckless borrowers.
But many of today’s troubled borrowers were not reckless. Rather, they
are collateral damage in a bust that has wiped out equity and hammered
jobs, turning what were reasonable debt levels into unbearable burdens.
Housing advocates and bankruptcy experts are calling for the
administration to try new approaches. One would have Fannie and Freddie
urge banks to let underwater borrowers who file for bankruptcy apply
their monthly mortgage payments to principal for five years — in effect,
reducing the loan’s interest rate to zero.
Another solution would be for Fannie and Freddie to ease the rule for
refinancing underwater mortgages for borrowers who are current in their
payments. The lower payments on refinanced loans would help to prevent
defaults and free up money for borrowers to use for paying down
principal or consumer spending.
I've heard other
suggestions, including federal mortgage assistance in exchange for a
share of the appreciation at resale time. But, sheesh, let's do
something already. --b.d.s.