While millions of homeowners continue to face foreclosure, the Treasury Department has just realized that loan modifications aren't working. I suppose that someone must be the last to “see the light,” but must that someone always be government?
Almost a year into the program and with a couple of million more homes lost to foreclosure, the wizards in Washington are now looking at “improving” their loan modification program. The point they seem to have missed is that we had a Housing Bubble, where home prices were driven up far beyond their value.
Offers to adjust interest rates or to extend the terms of mortgages do little to help those homeowners who won’t see their home’s value recover for many years. As more come to the realization that their mortgage payment is just falling into a “bottomless pit,” more will choose strategic default. The bubble losses must be absorbed by someone; and, after watching their tax money spent to “rescue” the mega banks, a great number of homeowners won’t be willing to assume that responsibility.
With the current pace of government action, millions more homes will be lost before the tide turns. Home prices will remain depressed, and neighborhoods will continue to suffer.
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