There is now no doubt that the plans of the federal government to stem the tide of foreclosures are failing. It has only managed to postpone the inevitable. The recent figures are speaking for themselves – foreclosures are rushing into market and furtherdepressing prices and increasing fears about more unemployment.
The approach has been two pronged – either get the loans modified or suffer modification. Most of the modified loans are defaulting all over again.
The banks are failing to handle the huge volume of foreclosures causing many to stay in the houses owned by the banks without paying anything. The economic problem is now taking on mega social tones regarding moral issues.
Noted expert on economy Dean Baker, had warned long ago about the housing and the stock market bubble. But few listened. It is high time he is lent an ear if the country is not slide down further.
Baker had suggested that instead of foreclosing the banks should rent out the houses to the previous borrowers at current rates for a long period of time. It would stophomelessness and empty dangerous houses while the bank would retain the option of selling off the house when the situation would improve. The rent would be affordable as in most areas it is lower than the mortgage borrowers were paying.
The plus points of his plan is that it would check the flow of foreclosed homes entering the market and keep intact the health of the neighbourhood with known faces going about their work instead of strangers prowling around. There would no longer be boarded houses inviting trouble and crime. None would require to be bailed out. The families would not have to live on the street but they wouldn’t be compelled to pay more than the current rent rates.
The minus points of the plan are that it would not apply to all. Not all the house owners would be able to afford even this rent; others would be against the idea of living as tenants. The banks dislike being landlords. But potentially it would mean a loss for them for failing to sell off the house currently. However by dumping houses into the market neither the banks nor the economy is gaining.
Agreeing to this plan would be admitting that the American Dream of all citizens becoming owners is not achievable.
The uncertainty hanging over the economy is mainly because of house prices.If the people think they will lose more on their houses they will make further cuts in their spending. Thrift is good for the individual but not for the collective.
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Government Rescue Plans are Failing Raising Fears of More Foreclosures
