Bernanke right — help is needed
By Chuck Doud
The Madera Tribune
Federal Reserve chairman Ben Bernanke is urging Congress to take additional steps to help homeowners “avoid preventable foreclosures,” which, he said would be in everybody’s interest.
Bernanke is right. Some homeowners now facing foreclosure might want to keep their homes and keep paying their mortgages if they could get a bridge to help them over the rough places in which they find themselves. Perhaps a government-backed bridge loan, which could be used to catch up on mortgage payments, then paid back over a period of time which the borrower could handle, might help.
It also might make sense for some mortgage companies to lower interest rates which have reset, resulting in payments which homeowners can’t handle. These adjustable-rate mortgages were fashioned to allow some marginal buyers to purchase homes they might not otherwise have been able to afford. When the rates reset at a higher rate, the mortgage company was supposed to be paid back for low-balling the earlier payments.
It might make sense for the mortgage companies to wait longer for payback instead of winding up with a lot of properties on their hands that can’t be sold for enough to retire the mortgage. If loss is inevitable, why not let the original buyer stay in the home, and both could possibly recoup down the line?
These strategies would make sense, because the real estate market will normalize eventually. People still are being born. The population of the country is continuing to expand. The demand for housing will bring prices back up.
The tragedy is that those who choose to walk away from their mortgages will have a tough time getting another mortgage, and eventually will wind up dealing with a subprime lender, which will start the spiral over again.
