There is no question that the Making Home Affordable Act is intended to stem the tide of foreclosure throughout the country. The practical question is, will it work. One dissenting vote was cast today by the Boston Federal Reserve. The Boston Federal Reserve contends that the decrease in wages and jobs is the culprit for the increase in foreclosures in the United States. Their solution?
“Their research found that policies that directly help homeowners overcome setbacks such as losing their jobs may be more effective in combating foreclosures…
The economists suggest that the government could instead replace part of an individual homeowner’s lost income from a job loss through loans and grants and help those whose predicament is more permanent become renters. “
This makes sense. However, I see so many clients who have the same wages that are getting hit by an adjustable or a non-fixed rate mortgage. Regardless, I think the basic point remains: modifications only work if people have the money to pay and this crisis will not abate until working people can make a good wage to pay their loans timely and in full.