Mortgage Assistance: Helping Those Who Won't Pay

The US Treasury is encouraging several large banks, lead by Citigroup (C) and Bank of America (BAC) to freeze foreclosures for 30 days while they sort out which homeowners should get restructured loans. "The initiative, which follows a week of talks with Bush administration officials, will apply to customers who are at least three months late on payments and include prime borrowers, as well as those with poorer credit histories," according to Bloomberg.

Homeowners who are over three month late in payments are not likely to be able to make the note even if there is a freeze and restructuring of payments. Banks may be able to make some interest concessions, but a modest reduction in monthly payments is almost certainly not going to help people who are more than a quarter behind.

Someone who hasn’t made a mortgage payment in over 90 days has either had a sharp drop in spending power, has lost a job, or simply does not care about the home in the first place. Even with some assistance these homeowners are not the best candidates for aid.

The government should turn its attention to people who are a month or two late or have been able to make partial payments. They have at least shown a desire to keep the same roof over their heads.

Helping the helpless or those who do not really want help solves no one’s problem.

Douglas A. McIntyre