A recent editorial in the New York Times talked about new steps that President Obama has authorized to deal with the needs of homeowners dealing with foreclosures, especially unemployed homeowners and those with underwater mortgages. However, there are still problems with the government’s plans, as the author of this piece pointed out:
So it was good to see Mr. Obama focusing aid where it is needed most. But two big concerns remain. First, the new plan must be implemented quickly and efficiently for it to be more than a public relations ploy, and as yet there is no timetable. More broadly, it is still not clear whether the administration realizes that the importance of the plan lies not just in what it might do for a handful of states but in the direction it should set nationally.
The administration’s $75 billion antiforeclosure program, which subsidizes lenders to rework bad loans, has been a big disappointment. One reason is that its usual method of modifying loans — lowering the monthly payment by reducing the interest rate — does not work well for jobless and underwater borrowers. Unemployed homeowners often cannot make even reduced payments and underwater borrowers need principal reductions to succeed over the long run, not lower rates.