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.”
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