Second Attempt at Mortage Relief

The Obama administration is still working on providing relief to homeowners facing foreclosure. The administration hasnt seen much success in trying to do this in the past, with their last attempt falling short of promised numbers. This new plan is similar to the last one where lenders would be encouraged to reduce payments for the homeowner for six months while they tried to find a job and have the lenders write off some of the loan to lessen the amount of money owed. An editorial from the Dallas News says:

Last spring, the Obama administration predicted its housing plan would help as many as 3 million to 4 million homeowners avoid foreclosure because lenders would voluntarily renegotiate distressed loans. Most didn't, and only about 169,000 households have received long-term payment relief. A similar plan and promise a year earlier from the Bush administration to encourage lenders to refinance the loans of distressed borrowers produced even more dismal results.

The Obama administration, however, remains undeterred. Even if 4 million households are aided – and history says they won't be – there are still about 8 million households currently behind on their mortgage payments or in the foreclosure process.

As painful as it is, the administration and American people need to confront two uncomfortable truths. The first is that many borrowers will remain vulnerable to defaulting again because they would still be deeply in debt even after their home-loan payments are reduced. The second is that until the economy begins to produce jobs in sizeable numbers, such temporary housing measures delay the day of reckoning and the eventual recovery of the housing market.

It is apparent that the government will not be able to dig every homeowner out of their debt and keep them from foreclosure, but any help that the government can provide to these homeowners is very important. Although continually asking lenders to lower payments can only help the situation so much.