I am no economist, but there’s something about the President’s mortgage foreclosure rescue plan that just has not been sitting well with me. I have not been able to put my finger on it and do the research to put together a thoughtful article. Fortunately, I can stay focused on my clients and share with you this article from BusinessWeek by Peter Coy and Theo Francis who point out that the plan doesn’t address the danger of negative equity, and that homeowners with negative equity “might just walk away.”
Even for those who want to keep their homes at the moment, reducing monthly payments without addressing negative equity may just postpone the inevitable. “The reality is, people lose jobs, especially in a recession. People get transferred, people have to move at some point,” says Sean O’Toole, founder and CEO of ForeclosureRadar.com, which tracks California foreclosures. “By lowering payments and not principal balance, you’re guaranteeing the extension of this crisis for years to come.”
