FROM LA TIMES
America’s failure to solve the continuing mortgage crisis is the most serious lapse in the aftermath of the 2008 subprime meltdown. Several decades of increased homeownership rates in working-class and minority communities have been wiped out. Most homeowners who lost equity, or their homes, were not speculators but innocent bystanders caught in the downdraft of the housing prices that followed.
The Obama administration’s mortgage relief program has helped only about 10% of the more than 13 million households still at risk of foreclosure because of “underwater” mortgages — those worth more than the value of the homes. The program did not target those most in need, and it can’t reach mortgages turned into securities by private Wall Street firms.
In the hardest-hit communities, the apparent firming of housing prices is mainly the result of speculators buying up vacant houses, not ordinary buyers coming back in. The missing ingredient in this dismal story is reduction of the principal owed on loans, so that people with underwater mortgages can stay in their homes.