Breaking: people without jobs can’t afford to stay in their homes

A study of the federal government’s mortgage loan modification program finds what many thought was already true: most people who couldn’t afford to live in their homes before their loans were modified cannot afford to live in their homes, now.

While the federal government’s “kicking the can further down the road” may have helped some, and helped the US economy by keeping families in their homes, the end result is the same: these people will lose their homes, regardless.

From the New York Times:

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good …

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

In an economy we haven’t seen in seventy years, I disagree that there was no good reason to throw these people a lifeline.

Now, however, as the economy recovers, we need to let the chips fall as they may – start working these loans through the system from foreclosure to resale. Only after we’ve removed the bad loans and empty homes from the inventory will we improve the housing market and, further, the US economy.

Related posts:

1. Boston: We’re #4! – MA owners have high-level of equity in their homes
2. Should lenders modify loan balances to keep people from foreclosures?
3. Did 2005 bankruptcy reform cause more foreclosures?
4. China Gov’t stimulus plan: $1 billion new city, no people
5. The Boston Globe: when times were good, it wrote about it; now … yeah