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Last week, President Obama launched yet another initiative to avert foreclosures, offering $1.5 billion from the $700-billion Troubled Asset Relief Program to housing finance agencies in California and four other states where home prices have dropped by at least 20%. The administration gave states a great deal of flexibility in using the aid, which will help them craft programs for those who owe more than their homes are worth or who have lost their jobs and need temporary or transitional help.
Although the initiative is promising, there’s a drawback to the administration’s repeated efforts to lower the foreclosure rate: Lenders may be tempted to wait for Washington to give them even more incentive to modify loans, rather than offering borrowers significant reductions now. The administration should make it clear that the best deals are already on the table.
Read more from the LA Times
