The New York Times Op-Ed page states that the Administration's new foreclosure prevention plan could save up to 1.5 million homes from foreclosure. Some highlights of the plan include: requiring lenders to consider reducing the principal on some underwater loans, new short-term modifications for borrowers receiving unemployment payments, and added incentives and requirements for banks that should increase participation.
This plan sounds like a better deal for borrowers. By moving towards required participation, the Administration is taking a step in the right direction. However, even if the plan saves homes, we are still expected to lose 3.6 million more through 2012. This basically means that the housing market will stay depressed for quite some time.
In my opinion, the Administration should take a large step towards heavy regulation of mortgage lenders. Requiring lenders to participate in these programs and monitoring compliance would be a step in the right direction. Instead of backing up banks that lose money at foreclosure auctions, spend that same money on a program that pays down underwater mortgages (while also requiring principal reductions from the banks) to restore some equity into our nation's homes. For those who would immediately cry, "government handout," keep in mind that the money would be spent on a handout to a massive bank as opposed to a financially distressed individual. To prevent abuse, prohibit borrowers from using that equity to finance another loan for a period of two years.
There is still a lot that could be done, but we are slowly getting there via baby steps.
Leave a comment