Should the government stop home foreclosures?

ShareThis

More than 45,000 American families lost their homes to foreclosure in January -- nearly double the number from a year ago. As foreclosures continue to rise and housing prices slump, officials at all levels of government are weighing action to aid homeowners. But some new programs have sparked a backlash from critics who oppose a taxpayer bailout.Is it government's responsibility to save individuals from their own financial mistakes? Ben Boychuk and Joel Mathis, the moderators of RedBlueAmerica.com, weigh in.Joel Mathis:Here is what happens when 45,000 families a month lose their homes:Surrounding houses lose their value. Property tax collections go down. Potholes ruin a few more car axles before being patched. Incomes are affected and municipal services suffer. Soon it becomes apparent that the collective pain of a foreclosure crisis ripples far beyond the individuals most directly affected. So foreclosure aid isn't really about saving people from the consequences of their actions: It's about protecting the rest of us from having to suffer as well.Now it probably hasn't escaped the notice of President Bush and Congress that middle-class homeowners are some of the most reliable voters out there. But in this case, political pandering is also good policy.Step back a second and realize that many of these foreclosures are the result of bad subprime loans that many homeowners didn't fully understand -- and that, it appears, big banks didn't want too well understood until it was too late. The problem was and is systemic; a systemic remedy would seem to be appropriate.America is built on rugged individualism. But our love of individual responsibility shouldn't be a suicide pact. Foreclosure aid helps all of us.Ben Boychuk:It's probably inevitable. The federal government -- and, by extension, U.S. taxpayers -- will bail out homeowners with upside-down loans. But here's the problem: The government is uniquely unqualified to be in the housing-appraisal and -resale business. Federally subsidized loans are partly why we have a subprime-mortgage crisis right now.The Democratic presidential candidates would exacerbate the crisis with heavy-handed intervention disguised as low-income and middle-class relief. Hillary Rodham Clinton, for example, wants a 90-day moratorium on foreclosures and a five-year freeze on interest rates. The idea is to give homeowners an opportunity to restructure their loans and save their houses from repossession. What's wrong with that? For starters, lenders -- the "bad guys" -- would be forced to take huge losses from uncollected interest payments. The credit crunch would compound as interest rates skyrocket for everyone else, especially future first-time buyers. Some help!Lawmakers shouldn't compound bad choices with even worse public policy. There is no better way to create barriers to homeownership and upward mobility than by embracing the misguided reforms now circulating in Washington. Sure, you might save a few hundred thousand homeowners from the pain of foreclosure. But you make life much more difficult for millions of otherwise responsible Americans in the process.(To join the debate, go to redblueamerica.com.)(Distributed by Scripps Howard News Service, http://www.scrippsnews.com)