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About 25 percent of borrowers helped under the administration’s massive foreclosure prevention plan have already fallen behind on their new mortgage payments, according to government data that raise new questions about the program’s effectiveness.
The delinquency figures reflect the latest troubles of the program, known as Making Home Affordable. Earlier this week, Treasury officials announced a campaign to put new pressure on lenders to do more to move struggling homeowners into loans with easier terms.
So far, more than 650,000 borrowers have been enrolled into the initial, or “trial,” phase of the program…
Why isn’t it working? Because for someone who loses their job, no modification will work. For someone who is massively “underwater” on their loan, lowering the payment doesn’t change the overall financial picture.
As I’ve been saying for a while, the only way out of this housing mess is to send America’s housing market it to bankruptcy reorganization. Its a big, old poop sandwich and everyone is going to have to take a bite. For those out there of an entirely ungenerous view – those who are employed and not underwater and are insisting that everyone just sink or swim – we can give you some tax breaks, or something, if you need a bribe to just agree to people being helped in a manner which does no immediate harm to you and will help you, in the long run (by sustaining housing at its current value, thus ensuring you don’t lose any of your existing equity).
Some people will have to lose their homes – the assistance, for them, should take the form of helping them to easily go through foreclosure/short sale and in to a rental property. For those who will keep their homes but who are underwater, it should take the form of reducing the principle balance to fair market value – which will be a huge loss to those who have paid for years and will now lose all the money they’ve paid to date; this will also be a hard hit on the banks, but at least everyone will know what the real value of their loan portfolio is, and the fear of a massive, new wave of foreclosures will recede.
My dear, fellow Americans – we borrowed ourselves in to oblivion and in the process massively over-inflated the value of our real assets, most especially our real estate. Its time to suck all the gas out of the bag and start afresh. Or, we can just let things fall apart even more – more people to lose their homes or just walk away from them, more banks going under, more jobs to be lost…its our choice.
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