The Solution To The Mortgage Crisis Is...

The federal government has tried a lot of different government programs, loan modifications, tax credits and initiatives to support the housing market. While these measures have had some effect, they have not stopped the foreclosure crisis. According to Yahoo Finance, “More than half of all homeowners with modified mortgages fell at least two months behind in their payments a year after the adjustment was made.” This clearly shows that the government’s methods are not working. So, how can we solve the mortgage crisis? All of the tactics tried so far have been aimed at adjusting interest rates. The best solution is to reduce mortgage principal. The only way that homeowners who are underwater on their homes will remain in their homes is by forgiving some of the principal. The government should have stipulated this when they were pouring billions of taxpayer dollars into the country’s biggest banks. Think about it this way, what motivation does the average person have to make their mortgage payment on time if they owe $400,000 on a home valued at $250,000?