Negative Home

The sub-prime mortgage fiasco continues to threaten millions of homeowners with foreclosure. The secondary aspect of the fiasco is that in many areas of the US the value of homes has fallen markedly. Many homeowners now have 'negative equity' in their homes - the value of the house is less than the cost of the mortgage. For example the house is now valued at $250,000., while the mortgage is set to pay off a house worth $280,000.

All of the business surrounding and involved with the housing industry greatly affects how the economy performs.

Politicians are now trying to figure out a way to help out those homeowners who are in danger of going into foreclosure. The aspect of the mortgage fiasco that has cast an odd shadow over this problem was the government's hand in bailing out investment bank Bear Sterns to the tune of billions.

The question that arises is why is taxpayer money being used to bail out a bank that is at the center of the problem, a bank that helped to design the sub-prime mortgages. In one way of looking at it, the bank is rewarded for providing a service which ultimately was destructive to the economy in general and the little guy in particular.

NYT: Tricky Task of Offering Aid to Homeowners

The task sounds nearly impossible: create a rescue plan for homeowners that will prevent a tidal wave of foreclosures, cost taxpayers as little as possible and avoid bailing out reckless lenders and greedy speculators.

...pursue what could become the most sweeping government intervention on behalf of homeowners since the New Deal.

...3.5 million (mortgages) ...will run into trouble in 2008 and 2009 as home prices fall, the job market weakens and monthly payments on some loans rise.

Needless to say the stakes are large.