Mortgage relief for those ‘underwater’

Last month alone, one in every 253 homes in Deschutes County was foreclosed upon. While Bend’s enduring housing disaster seems the flip side of its heralded growth years, the problem hardly nests there. One in every 397 homes in Crook County similarly went down in September, as did one in 449 in Jefferson County and, closer to home, one in 428 in Clackamas, one in 392 in Yamhill and one in 516 in Washington counties.

But the down economy and collapsed housing values exert widespread force upon folks paying their mortgages and living “underwater” — the estimated one in four homeowners whose mortgage debt exceeds the market value of their house. If there’s anything to cause a loss of sleep, it’s dutifully making payments on a loan that could not be paid off were the house sold today. If there’s anything that puts a damper on consumer confidence and spending — both linked to economic recovery — it’s carrying the debt that could lead to foreclosure.

President Barack Obama set out this week to reverse this trend as part of a “We Can’t Wait” economic recovery initiative. He embarked on a western U.S. tour whose highlight is a new mortgage refinancing program.

Unlike his Home Affordable Refinance Program that failed to garner widespread participation owing to unaccountable complexity, the president’s new initiative eliminates homeowner fees associated with refinancing, removes squirrelly income requirements, provides loans at rock-bottom prices and reduces risk for the banks involved. Significantly, the new program makes it more profitable for banks to modify a mortgage than to foreclose on a home — an incentive that by itself might ensure success.

Obama’s initiative requires nothing from a deadlocked Congress, and it can only be called a positive step forward: Up to 1 million Americans could benefit, keeping people in their homes and sparing them the pain and uncertainty of carrying overwhelming debt.

But it is not enough. HARP, launched in 2009, was to have benefited 5 million borrowers but reached fewer than 1 million, only a fraction of them seriously “underwater.” Indeed, of the $30 billion approved by Congress for it, only about $4 billion was tapped. There is just too much catching up to do before mortgage reform as constituted now could exert positive effects in an economy that depends upon secure consumers willing to spend.

Oregon Sen. Jeff Merkley argues persuasively that this is the perfect moment for the federal government also to devise a matching down-payment program to help all Americans buy a home. House and mortgage prices are low, creating an opportunity for families if only they could surmount the first obstacle of building a down payment. It would multiply the effects of a mortgage relief program designed to keep people in their homes and, in turn, move the economic needle.

We agree. As a mired Congress spurns the president on his proposed economic recovery measures, mortgage relief with more generous terms for borrower and lender is welcome news — a true bright spot for 11 million Americans living “underwater.”

But if the administration is to take a lesson away from its handling so far of the economic crisis, and with it a collapsed housing market, it is that doing too little too late exerts harm of its own.