Federal policy makers are discussing what - if any - more the government should do to rescue homeowners from mortgage loans they cannot afford. In some cases, the answer should be to stop throwing good money after bad.
About one-tenth of American homeowners with mortgages are either behind on their payments or already in foreclosure proceedings. As many as 2.25 million foreclosures could occur this year.
That has many in both the housing and banking industries worried. Obviously, they would like a new federal rescue program, in addition to the hundreds of billions of dollars already made available to help lending institutions deal with "toxic" mortgages.
But many of those in trouble were offered help earlier this year. According to the federal Office of Thrift Supervision, more than half of those who had loan provisions modified - to make payments more affordable - already are back in default.
OTS Director John Reich said this week that he has "concerns" about using more federal money to bail out such homeowners.
We agree. Short of some sort of amnesty program, it is clear that hundreds of thousands of those in default simply cannot be helped. They didn't just get in over their heads - they got in way over their heads. Using money from taxpayers who were more prudent in taking out mortgage loans simply doesn't make sense.
Reich pointed out that a better use of federal aid may be in programs intended to create new jobs. We don't necessarily agree with that; government "jobs" programs often spent enormous amounts and achieve little of lasting value.
But we agree with Reich that it may be time to allow more foreclosure sales to proceed. Clearly, providing more taxpayer-funded aid to some mortgage holders would merely delay the inevitable for them - while rewarding their imprudence.
