Mortgage Slaves

Ramsey Su writes something intelligent about the “foreclosure crisis:

If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.

via Why Be a Nation of Mortgage Slaves? – WSJ.com.

Read the whole thing. Foreclosed poperties will be sold. Foreclosure does give “homeowners” a path to actually becoming real homeowners in the future. I have some worry about “blighted neighborhoods”, but that seems preferable to locking people into permanent jeapordy.

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