Policies aimed at easing home loan terms for troubled borrowers may not be as effective in preventing foreclosures as more direct aid to homeowners, Federal Reserve economists have found.
Job losses and falling home prices have a bigger effect on delinquencies than mortgage terms, and modifications aren't necessarily a better deal for investors than foreclosures, two current and one former economist at the Boston Fed Bank and one Atlanta Fed researcher say in a paper posted Friday on the Boston Fed's website.
Monday, April 13, 2009
Why foreclosure mitigation has been failing
Now we know why government efforts to prevent foreclosures have been having only a temporary effect:
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"ob losses and falling home prices have a bigger effect on delinquencies than mortgage terms, and modifications aren't necessarily a better deal for investors than foreclosures"
ReplyDeleteDuh. I'm a big Obama supporter in general, but I gotta say that what his administration has being doing on the financial crisis, specifically in dealing with the banks and housing/foreclosures, just doesn't make any sense to me. I know there are political constraints, but he's a extremely popular president with a large majority on capital hill. Use that political capital and do the tough but necessary things that most sane economists and unbiased financial professionals have been recommending for months. This isn't going to get fixed by mortgage modifications, stress tests everyone passes and convenient changes to accounting rules.
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