New Efforts Underway to Avert Foreclosures

With the American housing market experiencing its worst downturn in 16 years, foreclosure rates continue to be a major concern. It has been said that the housing market is in a deep recession—although, so far at least, the crisis has not led to a full-scale economic recession nationwide.

Housing experts say they expect continued decreases in home prices, home sales, and new construction during the short term. By the end of 2008, the U.S. could be recording massive foreclosures—as many as 2 million.

The reasons are many. For instance, home values are falling, producing quite a strain on homeowners. In addition, in many cases, homeowners are seeing a substantial rise in their monthly mortgage payments because of readjustments in interest rates. In some cases, homeowners could see a rise of as much as $300 a month in mortgage payments. Likewise, economic conditions are worsening because of a soft job market and hard new lending standards.

President George W. Bush has called the housing market “challenged.” The President believes part of the prescription for curing the ailing housing market is keeping taxes low. Meanwhile, some members of Congress are pushing for a bailout plan to alleviate the troubles within the housing industry.

Senator Richard Durbin (D-IL) has introduced a measure that would permit bankruptcy courts to change the repayment terms on mortgages for primary residences. Some experts believe the plan could enable more than a half a million homeowners to remain in their homes. They would be permitted to pay their mortgages over longer terms at lower interest rates or lower principal balances.

It’s unclear, however, whether the plan will win the support of the Bush Administration. Some concerns have been raised that changing mortgage terms in bankruptcy could threaten the standing of other contracts. Meanwhile, the Federal Reserve has indicated it’s prepared to do everything possible to prevent the housing crisis from leading to a nationwide economic recession.