Issue of the week: New help for struggling homeowners
The Obama administration rolled out a revamped program to help homeowners facing foreclosure.
It’s back to the drawing board, said Terry Savage in the Chicago Sun-Times. The Obama administration last week rolled out a revamped program to help homeowners facing foreclosure, offering $50 billion in incentives to lenders to stretch out mortgage maturities, reduce interest rates, and lower loan principal amounts. It’s all part of an effort “to break the surge in foreclosures and the logjam in modifications.” It’s clear the administration had to do something—its Home Affordable Modification Program, launched last year, has resulted in the modification of a mere 168,000 mortgages out of more than 1.7 million eligible cases. The revised program is aimed at homeowners who owe more than their homes are worth—a condition affecting one in every four homeowners—or who have lost their jobs and fallen behind on payments. Unemployed borrowers can see their payments reduced to 31 percent of their unemployment benefit, while those drawing a reduced income can refinance into federally guaranteed mortgages and have their principal lowered. But is it fair to subsidize delinquent borrowers with the tax dollars of those who have stayed current on their mortgages?
It most certainly is not, said Lawrence Kudlow in RealClearMarkets.com. “Team Obama is rewarding reckless behavior, punishing the 90 percent of responsible homeowners who are making good on their mortgages.” Worse, the administration’s new plan offers subsidies to people making up to $186,000 annually who owe more than $700,000 on their mortgages. “This isn’t even a middle-class entitlement. It’s an upper-middle-class entitlement.” Sad but true, said Megan McArdle in TheAtlantic.com. The plan probably will provide only “minimal relief for borrowers in the worst-afflicted areas,” because the government won’t guarantee loans that exceed 115 percent of a home’s current value. That’s not much help to folks in Las Vegas and parts of Florida where housing prices have plunged 50 percent or more.
The administration never said its program would help every hard-pressed borrower, said Kevin Hall in The Sacramento Bee. It admits that it might save perhaps a third of the 12 million homes facing foreclosure in the next several years. Even so, “Republicans weren’t shy about labeling the effort another bailout.” But faced with a tsunami of foreclosures in an election year, said Stephanie Armour in USA Today, the administration was forced to act—even though some of the modified loans will still go into default, sticking taxpayers with the bill. But if all goes according to plan, many foreclosures will be delayed, which will help keep the still-fragile recovery on track. Spreading foreclosures over a longer period means home prices will decline over a longer stretch. That might not sound like the perfect solution, but it may be the best we can hope for.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Create an account with the same email registered to your subscription to unlock access.
-
'A direct, protracted war with Israel is not something Iran is equipped to fight'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Today's political cartoons - April 17, 2024
Cartoons Wednesday's cartoons - political anxiety, jury sorting hat, and more
By The Week US Published
-
Arid Gulf states hit with year's worth of rain
Speed Read The historic flooding in Dubai is tied to climate change
By Peter Weber, The Week US Published
-
Arizona court reinstates 1864 abortion ban
Speed Read The law makes all abortions illegal in the state except to save the mother's life
By Rafi Schwartz, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
'Rwanda plan is less a deterrent and more a bluff'
Instant Opinion Opinion, comment and editorials of the day
By The Week UK Published
-
Henry Kissinger dies aged 100: a complicated legacy?
Talking Point Top US diplomat and Nobel Peace Prize winner remembered as both foreign policy genius and war criminal
By Harriet Marsden, The Week UK Last updated
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published
-
More covfefe: is the world ready for a second Donald Trump presidency?
Today's Big Question Republican's re-election would be a 'nightmare' scenario for Europe, Ukraine and the West
By Sorcha Bradley, The Week UK Published