Mortgage Modification Bad for Banks
Surowiecki also goes over the current strategies for helping homeowners hold on.
"If we really want to keep people in their homes, then, nudges and renegotiations probably aren't going to do it. We need more direct action. One option, which the banking lobby killed earlier this year, would be to allow "cramdowns": let bankruptcy judges reduce the principal on homeowners' mortgages. Another, even more direct option is simply to give aid to homeowners: one proposal would have the government make low-interest loans, or even grants, to people who have suffered a steep decline in income and have negative equity in their homes."