What Can Be Done for "Underwater" Homeowners?

In the pages of today's New York Times, an editorial suggests that far, far more needs to be done for homeowners who are "underwater."  Underwater is a term referring to a homeowner who owes more on their home than the home is currently worth.


It is an old truism, and quite possibly true, that where the housing market goes, so goes the economy. In other words, as the article states, "Congress and the White House have yet to figure out that the economy will not recover until housing recovers."  Essentially, we're all in this together!


So what can be done? Banks were offering homebuyers tricky "subprime" mortgage loans whose interest rates suddenly jumped up after several years. Programs like City First Homes are a large part of the solution.  CFHomes, in contrast, helps homebuyers to affordably access homeownership with fixed-rate financing, and offers buyers homebuyer education classes prior to purchase.


The editorial states:

• Banks are not doing enough: "Instead of pushing the banks to do what is needed, the Obama administration has basically urged them to do their best to help, mainly by reducing interest rates for troubled borrowers. The banks haven’t done nearly enough. In many instances, they can make more from fees and charges on defaulted loans than on modifications." 
• Fannie Mae and Freddie Mac can force banks to do more: "[The government should] start by working with Fannie Mae and Freddie Mac, the government-run mortgage companies, to aggressively reduce the principal balances on underwater loans and to make refinancing easier for underwater borrowers."

This article offers one perspective on what could be done; other articles have suggested alternative solutions.  The main point is that something has to be done, if the housing market -- and eventually the economy -- are going to recover.  We're all in this together!

- Jyothi Ramakrishnan