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Washington must focus on foreclosure

Our Voice

Hickory Daily Record Editorial

Published: November 14, 2008

The mortgage meltdown is worsening daily and action must be taken in Washington before it's too late.

On average, 2,700 Americans lost their homes every day from July through September, up from 1,200 during the same period a year ago, according to The Associated Press.

In North Carolina, home foreclosures are up 30 percent in October from the previous month. One in 1,254 homes in North Carolina last month received a foreclosure filing, according to RealtyTrac Inc.

The Mortgage Bankers Association reports that more than 4 million homeowners were at least one month behind in payments at the end of June, and a record half-million homeowners had entered the foreclosure process.

Several factors suggest the crisis could get worse, chief among them is falling home values.

What to do about the current situation may be in dispute, but few disagree that the housing crisis is at the core of the country's financial crisis.

The ideal solution to the crisis would be one worked out by the lenders and borrowers, relying on the marketplace to work through the problem. But it is becoming clear that governmental response is necessary.

Multiple proposals have surfaced in Washington. A plan floated by the Federal Deposit Insurance Corporation calls for a government guarantee for mortgages that have been renegotiated by banks and borrowers.

But the Bush administration is backing away from proposals to have the government refinance a broad swath of homeowners who face foreclosure after taking out subprime mortgages and other high-risk loans over the last few years. The plan Bush as proposed is much more limited. It could lead to lower monthly payments for several hundred thousand homeowners, according to officials. But it would have virtually no effect on the millions of people who took out expensive subprime loans and who are at the heart of the nation's foreclosure crisis.

Foreclosure legislation must be at the top of President Bush's domestic policy in the remaining months of his administration.

But just as important, Americans must accept that help is needed not just for those facing foreclosure, but also for financially secure homeowners. More foreclosures translate into lower home values for everyone, which will exacerbate the economic crisis. It's clear that although many struggling homeowners have been victims of the economic downturn, others were simply irresponsible and took on too much debt.

As we lend and invest hundreds of billions of dollars to help institutions suffering leveraged losses from defaulting mortgages, we must also devote some of that money to fixing the front-end problem: Too many unaffordable home loans.