With historic declines in home values, millions of families owe more on their homes than they’re worth. This means defaults and foreclosures will keep coming. The Administration’s initial plan to help nine million homeowners has so far come up short. It will need to be modified to prevent mass displacements. Homeowners should be offered greater latitude to re-write the basic terms of their mortgage, including the amount of principle owed. This is called a “cramdown” and just introducing this possibility into the mix will get banks and loan servicers to the table to work more diligently with besieged homeowners.
For more thoughts on matter and how it connects to the proposal to create a new Consumer Financial Protection Agency, you can listen to my podcast.
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