A New York Times editorial, “Homeowners Need Help,” (8/21/11) applauds the Justice Department for investigating whether Standard & Poor’s purposely overrated bad mortgage securities in the years leading up to the crisis. However, that storyline mostly serves as a hook for calling for more action to help homeowners hurt by the housing crisis.
The editorial argues that the Obama Administration and the banks have not done enough to help struggling homeowners, citing convincing statistics. Home prices have declined 33 percent since the market’s peak five years ago and 14.6 million homeowners are underwater, owing more on their mortgages than their homes are worth. In addition, 3.5 million homes are in some stage of foreclosure and nearly six million borrowers have already lost their homes.
What’s on the NYT editorial board’s wish list?
- Principal reductions for underwater loans, brought on by Fannie Mae and Freddie Mac “urging” banks to do so
- Allowing refinancing on a wider range of underwater mortgages for borrowers who are current on their payments
- Allowing underwater borrowers who file for bankruptcy to apply their monthly mortgage payments entirely to principal for five years (in effect, temporarily reducing the loan’s interest rate to zero).
We’ll see after Labor Day what comes out in President Obama’s jobs-creation plan, which is expected to include some housing relief measures.