The mortgage crisis just got worse, said Vikas Bajaj and Louise Story in The New York Times. “Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit.” Now even “prime” borrowers are falling behind on payments. Many were sucked into the housing bust, either because they can’t sell their homes or are having trouble refinancing adjustable-rate mortgages. What went wrong? Credit counselors claim lenders and mortgage brokers pushed borrowers with perfectly good credit into risky loans. Others say homeowners simply disregarded warnings about taking on too much debt.
If you’re conflicted about extending help to homeowners in trouble, you’re not alone, said Stephen Gandel in Money. In a CNN poll, more than half of respondents said borrowers had only themselves to blame. “Before you join this tough-love brigade, however, consider how you might find your own fortunes tossed about in the rising tides of foreclosure.” An increase in foreclosures will likely drive down the value of your own home and could severely “squelch economic activity.” Without help, 3.5 million owners could lose their homes in the next two and a half years, according to Moody’s Economy.com. “That’s the equivalent of every family in both Dakotas, Delaware, Hawaii, Idaho, Montana, Nebraska, New Mexico, and Wyoming losing their homes.”
Some relief may be already on the way, said Noelle Knox in USA Today. Six of the country’s largest lenders have pledged to back the Bush administration’s efforts to help homeowners avoid foreclosure. “Together, they service about half of all mortgages.” The program, Project Lifeline, calls for delaying foreclosure proceedings of borrowers who are at least three months behind on their mortgage payments. “Nearly 575,000 homeowners fit that profile at the end of the third quarter, but it’s unclear if many will be saved.” The program won’t apply to mortgages on second homes or houses bought as investments. Nor will it help homeowners “who lied on their mortgage applications” or are already in foreclosure. But “Project Lifeline does go beyond the mortgage industry’s initial plan, announced in October.” That effort applied only to subprime loans, and “borrowers had to be current on their payments to qualify for aid, which meant that hundreds of thousands were out of luck.”
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.
-
Fannie Flagg’s 6 favorite books that sparked her imaginationFeature The author recommends works by Johanna Spyri, John Steinbeck, and more
-
Google: A monopoly past its prime?Feature Google’s antitrust case ends with a slap on the wrist as courts struggle to keep up with the tech industry’s rapid changes
-
Patrick Hemingway: The Hemingway son who tended to his father’s legacyFeature He was comfortable in the shadow of his famous father, Ernest Hemingway
