WaPo reports that many banks (and even Fannie and Freddie) are learning that foreclosure prevention efforts aren’t reaching as many people as hoped, and are developing foreclosure alternatives.
Citigroup, for instance, plans to announce a pilot program on Thursday that would allow delinquent borrowers who don’t qualify for or decline mortgage relief the opportunity to stay in their homes without making payments for up to six months before turning over the keys, in return for keeping the property in good condition. The bank estimates that up to 20,000 borrowers in Texas, Florida, Illinois, Michigan, New Jersey and Ohio could be eligible.
1.9 million foreclosures are predicted this year. These alternatives are being touted as a way to make the process more orderly and to avoid a glut of foreclosures down the road.
Do you buy it?
Every one of these foreclosure fixes seems to either 1) have unintended consequences or 2) fail to reach as many people as expected.
In the same vein, Rutgers University economics professor Eugene White opines in yesterday’s Wall Street Journal (subscription required) that these foreclosure rescue efforts actually harm many of the people they are supposed to help. Find out why he thinks that the poor are better off renting.