The White House will announce today new steps to fight the foreclosure crisis. They may require lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed.

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower’s income, which would typically be the amount of unemployment insurance, for three to six months. In some cases lenders may allow a borrower to skip payments altogether.

Haven’t we been through this already with the loan modification programs of the past year? Less than 200,000 permanent loan modifications have been secured since the program was enacted.

The new wrinkle will be the administrations push to deal directly with the massive number of mortgages that are ‘underwater’. They could offer financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the FHA.

I do think this could help stop people from walking away just because it is underwater who can actually afford their house payment. However, as a general thought, it feels a lot like just one more government attempt to help boost numbers thru the remainder of the year so that we can get past the elections.

Lets be honest, government attempts to resolve the housing crisis have been a miserable failure. More importantly, it has strapped the tax payer with a debt level that has never been seen in this country’s history. That will have a much longer negative effect on the housing market than the false boost we have been given from the tax credit offered.  Despite billions of dollars in government incentives, home sales and new construction totals are sinking, not expanding. 

The truth, as hard is it may be to accept, is that this is a supply and demand issue. Until supply is worked thru, the housing market will not recover substantially. The foreclosure inventory has to be taken out of the system. New home builds will not recover until ‘cheap’ houses are not an option to purchase. Who in their right mind would pay $300,000 for a new house when they can buy a similar house with more square footage that is only a few years old for half of that total?

Existing house values rise as a direct result of new home construction. New housing construction has also proven to be a leading indicator for an overall economic recovery.

To me it is pretty simple, we fix the problem by expediting the foreclosure inventory thru the system as quickly as possible. Until that excess inventory is removed from the system, the housing market will not recover. HAMP and other government programs will just drag out the inevitable supply and demand issue.

I wrote an article last fall discussing my ideas on how to fix the problem. I’ve been in countless board room and conference call discussions with industry leaders about this very thing. I’m still convinced to this day that dealing with supply will ultimately resolve the demand issue, and event he economic problems we face.

Jason K Roberts

CEO

www.SellMyHouse.com

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