Friday, November 13, 2009

More Foreclosures to Come

New York Times editorial "More Foreclosures to Come" (November 13th, 2009) submits a concern for the future of homeowners on the brink of foreclosure. Neglecting to answer the question, "why should the government worry about foreclosures?" the article begs the question of whether or not the Obama administration should spend its limited resources on fighting foreclosures.

By conservative estimates, 2.4 million homes will be lost in 2010, while prices will fall another 10 percent or so. This should be a wake-up call for the Obama administration. Foreclosures are expected to surge, in part, because lenders have been delaying the process during the long rollout of the administration’s antiforeclosure plan. But according to Moody’s, most troubled borrowers ultimately will not qualify for help, and a backlog of bad loans will soon enter foreclosure.

Homes are not lost. They are foreclosed upon, often by banks. Banks have no use for houses. If they can sell them, or rent them, they not only "should"--they will. Only foolish laws that prevent them from renting for short periods or foreclosing gives them incentives to keep them until better buyers come along. While one family may leave a home, another will enter it. Houses are not "lost", they are transferred.

Furthermore, it is not evident why we want to keep families in homes whose rental rate, (or mortgage payments) are much too high for these most troubled borrowers. It seems the same number of dollars are better spent helping a greater number of marginal families--those who have a chance at making most of their mortgage payments.

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