Helping borrowers will help neighborhoods
But the voluntary industry rescue organized by Treasury Secretary Henry Paulson is inadequate. The Hope Now Alliance may do some good, but it won’t reach enough foundering borrowers.
A better idea: Change federal bankruptcy law to allow judges to modify mortgage terms. This simple tweak could keep more than 600,000 people in their homes, according to the Center for Responsible Lending, an advocacy group that has worked to curb predatory lending.
No matter what is done, foreclosures will rise over the coming months as a string of bad decisions by borrowers, lenders and investors ripples through the economy. Not everybody deserves help, of course, especially speculators who bought homes with the intent to flip them for quick profits. Only borrowers living in their homes should qualify.
And the government should not use taxpayer money to bail out anyone. That includes homeowners in over their heads and investors who had unfortunate adventures in mortgage-backed securities.
But some help short of that is warranted for battered neighborhoods in places like Milwaukee and Detroit. The Paulson plan doesn’t go far enough. A change in the bankruptcy code also is needed.
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