Too Little, Too Late: Latest Government Housing Help Misses the Mark

Curtis, say it isn't so?  Our federal government didn't get something right...got to be a first.

Helping homeowners who should be renters is not the solution to the real estate and unemployment problems of our country.  Focus needs to be on the millions of homeowners who are comfortably making payments on their home purchases of 2004-2007.  They are gainfully employed, are in no danger of losing their home, and can easily make a monthly payment substantially higher than their current responsibility.  They live in their starter or first move-up home and really want to trade up.  The family has gotten larger, the garage needs another stall, they want a backyard, etc. Unfortunately their loan balance substantially exceeds their current equity.  If they continue to make their monthly payments, the loan will amortize to even in 10-14 years.  They don't have to move, but they really want to move, and they can afford to make the increased payment.  They are the potential buyers for our stagnant housing market.  They can put construction workers back onthe job, and that would help our economy tremendously.

With government encouragement and, perhaps, government assistance, a principal reduction plan has to be put in place.  I suggest that, in exchange for an agreement by the homeowner to increase their monthly payment, banks allow a temporary incremental reduction in interest charged.  This would accelerate the reduction of the negative equity and allow for considerably more mobility among "stuck" homeowners.  We would likely see results in a couple years.  Instead of delaying the return of accidental homeowners to the rental market, emphasis must be placed on helping the segment of homeowners who have the potential to get the real estate market and the economy back to cruising speed.