Do more to prevent foreclosures? or do nothing?

This New York Times editorial says that the government needs to do a lot more to help people who are “under water” keep their homes. While acknowledging that “there is no evidence that the Obama administration’s efforts [so far] to address the foreclosure problem will make an appreciable dent,” the Times argues that “more promising antiforeclosure efforts” are being tried and should be expanded.

On the other side of the issue are those who believe that government intervention just delays the necessary day of reckoning. Chris Fountain’s blog (including the readers’ comments) offers a representative sampling, mostly of this view.

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2 Responses to Do more to prevent foreclosures? or do nothing?

  1. Old School Grump says:

    What, exactly, IS an “anti-foreclosure effort”? Does it involve just flat-out erasing some of the principal amount of the loan? I could accept that (despite the moral hazard angle) if I knew that the lenders would eat the losses. But they won’t; the cost of the lost smoke-and-mirrors homeowner equity will get passed on to us taxpayers.

    So, either a) explain to me how I’ve gotten it wrong, which I will be genuinely happy to hear, or b) tell me why I’m supposed to be happy to be conscripted to shovel the shit behind the elephant.

    • Based on what I see in the NYT editorial, “antiforeclosure efforts” can involve either a write-down of interest and/or principal by the bank (the reduction eaten by the bank), or a similar write-down paid for by the government (you and me). It looks as though the shoveling has so far been left to you and me.

      Toward the end of the editorial, the Times gives an example of a “more promising” approach, in which individual states provide “temporary cash assistance to help pay mortgages, rather than loan modifications.” Again, taxpayers shovel.

      Looks like you’re not about to start smiling.

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