File This Foreclosure Story under “Duh”
It’s becoming increasingly difficult to keep up with all of the “pity the broke people” stories being published in recent weeks. Almost as soon as I finished yesterday’s commentary on a deceptive sob story headline from the New York Times, I read yet another goofy piece published by CNNMoney. This article reminds us that foreclosure abatement programs are all the rage but sadly points out that unemployed homeowners with no incomes are not eligible to modify their mortgage loans. Really? Can this be true?
Returning to reality, what was the point of this story? Do we really need to be told by a national news organization and popular personal finance magazine that if a borrower cannot pay his mortgage because he has no income he will lose his house, through foreclosure if necessary? In the article, a law professor is quoted as saying “something needs to be done for them.” What would that be exactly? An emergency fund? Oh wait – that’s the homeowner’s responsibility … isn’t it?
Earth to CNN: Foreclosures are not a recent development and were not invented to punish today’s unemployed. If the remedy of foreclosure is denied to lenders when borrowers have no income, the risks of lending will go sky high. The consequence of that would be fewer loans being made, and to only the very best of borrowers.
High rates of unemployment are going to be with us for a while. That’s what happens when a credit party ends abruptly. Some people will suffer. Unemployed homeowners with substantial emergency funds can ride it out. Those who have equity can sell. Those who have neither are in real trouble. But that is not a reason to completely re-engineer the mortgage financing system.
So please CNN. Spare us from stories like this. Just put them directly in the “duh” file.