I found this interesting video online today:
New guidelines for refinancing (aka HARP) have come out to "help" homeowners again who are underwater on their homes. After the failure of the first push to modify mortgages, I doubt this push will be any more successful.
My favorite quote from the video:
"Will it be enough? Maybe. Maybe not. But its definitely a step in the right direction."
Really? What direction might that be? Entrenching people in their homes as debt slaves? Creating dis-incentives for bond investors to enter the market so they can lend to folks who actually qualify?
The answer is to let the market find its equilibrium by allowing homeowners who are underwater and lack the income to service their debt to foreclose. Foreclosure eliminates excessive and bad debt. It resets home prices at lower and truly affordable levels that are related to household income and not manipulated according to gimmicky government programs.
Foreclosure is uncomfortable and often traumatizing to the homeowner. However, with so many homes already reset to lower prices, the chances are high that a homeowner will be able to rent a home in the same neighborhood for less than they were paying on their mortgage prior to foreclosure.
Foreclosure is the natural solution to excessive debt. The sooner that nature can take its course, the sooner our economy will be on the mend, and this tough period in history will be behind us.
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