Foreclosure aid is overdue

Foreclosure aid is overdue

Dallas Morning News: As the economy falls deeper into a recession, more Americans are losing houses to foreclosures.

In response, President Barack Obama flexed the government’s financial muscle Wednesday, taking an aggressive stance to halt a part of these foreclosures.

Under the Bush administration, the financial industry was given a chance to do the responsible thing and work with homeowners to forestall foreclosures when reasonable alternatives were available. Unfortunately, that didn’t happen, so now the government must step in. Rebuilding the housing market by saving worthy homeowners from foreclosure is as critical to the economic recovery as rescuing banks and creating jobs.

Funding for the effort will come from money that was set aside by Congress last year. It includes $75 billion in anti-foreclosure spending, plus $200 billion in new government commitments for Fannie Mae and Freddie Mac.

The plan is not intended to prevent all foreclosures. For instance, speculators who bought multiple houses as investments would not be bailed out. And lenders will still have a strong voice in deciding which loans they will renegotiate.

Here’s why the plan makes sense:

UThe federal government will offer financial incentives to encourage lenders to refinance homes to lower rates or more affordable repayment terms. This initiative is aimed at the millions of homeowners who were pushed to the financial brink when their adjustable mortgages reset to higher interest rates last year.

UThe $200 billion to Fannie Mae and Freddie Mac will allow these historically huge players in the housing industry to buy and sell more mortgages, thus easing the credit crunch.

UHomeowners who are current on their debt will receive help to refinance their houses to lower rates. Americans who aren’t in financial distress will be able to take advantage of lower interest rates.

The administration expects this program to be up and running the first week of March. Stopping the slide in home prices and spike in foreclosure rates can’t happen soon enough.