Friday, October 28, 2011

It's Time for Debt Forgiveness, American-Style | The Nation

It's Time for Debt Forgiveness, American-Style | The Nation
Write down the principal they owe on their mortgage to match the current market value of their home, so they will no longer be underwater. Refinance the loan with a reduced interest rate, so the monthly payment is at a level that the struggling homeowner can handle. This keeps families in their homes, with a renewed stake in the future. It gives homeowners incentive to keep up their payments, because once again they have some equity and the opportunity to accumulate much more.
I think Greider is right. If this doesn't happen, it won't be just owners who suffer. Local governments and CIDs will be under increasing financial stress. There may be another 10 million foreclosures before all this is over, and when people think they are going to be foreclosed on they stop paying property taxes and HOA/condo fees.

1 comment:

Anonymous said...

Lenders while behaving recklessly and failing to underwrite loan applications do not extend mortgages based on where the residential real estate market is headed.

Borrowers benefit if the market goes up and lenders do not expect to share in the gains. If it goes down, why should lenders indemnify borrowers for the downside risk?