Can We Stop the Bleeding in the Housing Market?

It seems that regardless of what the federal government does to prevent foreclosures from happening at an alarming rate, it just isn’t enough. In fact, one of the latest programs to help troubled homeowners – the HAMP program – has only helped about 435,000 homeowners get into permanent loan modifications that make their mortgage payments more affordable so they don’t have to go through foreclosure. That might sound like a high number, but the original goal of the program was to help millions of homeowners get into permanent loan modifications to reduce the stress of their high mortgage payments. So is there any way to “stop the bleeding” and come up with an effective strategy to help the housing market and the millions of homeowners who are in danger of foreclosure?

Gretchen Morgenson, a columnist for the New York Times, has made some bold suggestions to help the housing market. One of the problems she sees in the mortgage market is the inability of homeowners who have gone through short sales on their homes to get mortgage loans for new homes for several years. In a market where banks have an abundant surplus of homes for sale, limiting the number of potential buyers is not the best strategy to get those homes off their list. So is it time to loosen the restrictions on those people who have done short sales on their homes? With so many of them around, it might be a good idea to give them a second chance as it would bring more potential buyers to the table.

Morgenson also suggests refinancing the subprime mortgage lenders, the organizations that got us into this mess in the first place. Unfortunately, this plan would not help the homeowners who find themselves in mortgage trouble. They would still be underwater in their mortgage loans. The mortgage payments won’t necessarily come down unless the banks and borrowers actually get together to work on lowering the loan amount. This can be done a variety of ways, including a zero-interest balloon loan based on the difference between the home’s market value and the balance of the mortgage.

These are just a couple of the ideas concerned people have thrown out there in hopes of sparking a healthy debate about what can be done to solve this crisis that just doesn’t seem to be letting up. Do you have any ideas about how to stop the massive number of foreclosures that are taking place every month in the mortgage industry? If so, we’d love to hear your thoughts and suggestions.