A better solution to the foreclosure crisis

Treasury Department officials held yet another press conference and announced yet another plan Tuesday to prevent foreclosures and save struggling homeowners.

The idea is to target borrowers who are at least 90 days delinquent and owe too much money in proportion to their income. The number-crunchers think they can stabilize the global financial system by offering these borrowers three-percent interest rates and forty-year terms, and possibly forgiving some of the debt.

As America Wants To Know has written before, this kind of program creates a perverse incentive for people to stop paying their mortgages, and that makes the whole problem worse.

Crunch all the numbers you want, you won't change human nature.

Instead of bailing out current homeowners who have made bad investments, why not look past the foreclosures and help the future homeowners who are ready to buy houses?

Every day the officials at the Treasury Department and the Federal Reserve stare at their screens and analyze their data, but there are some things that cannot be measured and reported and displayed in nifty bar charts.

One of those things is the number of people who have been waiting to buy a house.

Maybe you know one of them. Maybe you are one of them.

There are people who have saved for a down payment for years and watched in frustration as the rise in real estate prices outpaced their savings and crushed their plans.

Why not help them?

Why not create a federal program of three-percent-interest 40-year loans for credit-worthy buyers who come to the table with a down payment of at least ten percent and occupy the homes they buy?

There's no perverse incentive in that.

It doesn't have to be a permanent program.

Think of it as a program of federal disaster-relief loans.

Maybe it's time we stopped trying to save the people who caused the earthquake.


Copyright 2008

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