Foreclosure Problem Needs Stronger Countermeasures
Neil Kashkari dutifully took Henry M. Paulson Jr. place during the government’s unveiling of its latest foreclosure prevention scheme. The Treasury secretary was conspicuously a no-show in last Tuesday’s announcement of the now controversial plan which, according to critics, is just another half-baked measure to solve the housing problem.
As if in tacit agreement, a Treasury spokeswoman said that the government plans to look towards more options to help those with homes in danger of foreclosure.
The newest anti-foreclosure plan to bailout troubled owners with delinquent loans under mortgage company giants Fannie Mae and Freddie Mac has had its fair share of detractors. With good reason, critics have capitalized on the fact that the $ 700 billion scheme would only help a limited number of Americans, while 3 million homeowners facing foreclosure will still be left out in the rain.
This proposal aims to solve the housing crisis by hoping that other lenders would follow Fannie Mae and Freddie Mac’s example. Since then, three other large mortgage companies — JP Morgan Chase, Citigroup and Bank of America — have announced their own plans to help out troubled homeowners at risk of having their homes repossessed.
However, these banks do not directly control loans that need to be restructured. Loans are instead distributed to different investors, making agreement over restructuring terms difficult. These conflicts have prevented efforts to finally stem foreclosures.
President-elect Barack Obama himself has proposed an amendment to the law to provide homeowners facing foreclosure with the option to have their mortgages revised in court.
If government wants to stop foreclosures, it should provide stronger incentives to persuade lenders and investors to restructure mortgage payments on bad loans, instead of taking the case to court. If borrowers and lenders are finally provided with the most responsible option to restructure loans that should not have been made in the first place, taxpayers could breathe a little easier during these hard times.