Foreclosures May Be Unstoppable

Every problem is supposed to have a solution, no matter how difficult.

The rising number of foreclosures and the falling prices of homes should be arrested by plans from the government and large banks to reset and renegotiate home loans for people who are at risk for being thrown out. So far, nothing else has worked.

At the same time institutions are trying to help the housing market, foreclosures are rising.

According to Reuters, "U.S. foreclosure activity in October rose 25 percent from a year earlier." That means the market is still in free fall and building a foundation under it may become more difficult. The number of unoccupied homes is up which will keep prices down. Even with improved lending terms, people who have income problems will abandon houses that they do not believe will ever be worth more than the loans they have against them.

Attacking the housing problem from the direction of mortgage relief may prove to be ineffective. The underlying cause of defaults and delinquencies is often unemployment or fear of unemployment, both of which are growing. Economists at Wachovia recently said joblessness will hit 9% next year. Some analysts believe that the figure is optimistic.

When one out of every ten Americans who can work is out of work, the man next door and the man next door to him will wonder if they are next. That makes for one person who has no job and two more who think they will be next. Those people are not candidates for mortgage improvements. Panic is too close at hand.

The government does not have the capital and probably does not have the inclination to put a safety net under the job market. But, while the number of people out of work grows, so will foreclosures.

Douglas A. McIntyre