One in Five Homeowners Owe More Than Their Home’s Value

It’s estimated 20 percent of single-family homeowners, or 15.4 million, owe more on their mortgage than the current value of their homes. According to Moody’s this number is up from 13.6 million homeowners at the end of last year.

Another new Obama administration plan was just announced to try to help the foreclosure hurricane. This new plan focuses on encouraging short sales.

The earlier plans to deal with this crises from the Obama administration, have now been shown to have had only a marginal effect. It would seem that all the government intervention only creates lots of optimistic press and little actual relief.

The exception to my above opinion, is  the Mortgage Forgiveness Debt Relief Act of 2007.  This law states that the difference between the original mortgage and the amount for which a home sells at a short sale (i.e., the amount of debt forgiven by the bank) is no longer considered taxable income by the IRS.

Perhaps, just perhaps, the government should not meddle in the foreclosure process. After all, the reality and cure to this housing problem is the fact that home prices need to fall to a level at which all the excess inventory will be absorbed.

In my opinion, though well intentioned, the majority of goverment mortgage assistance/foreclosure moritoriums are only extending the natural cure time and provide little actual long term solutions.                        San Diego real estate