Prometheus 6

The foreclosure prevention bill is not a cure-all, by any means, but is a way to try to break the cycle. It would allow many troubled borrowers to exchange their unaffordable loans for new mortgages guaranteed by the federal government — as long as the lender agreed to reduce the existing loan balance to 85 percent of the home’s current value. It is questionable whether lenders would be willing to take the loss, and there’s nothing in the law to prod them to do so.

As Foreclosures Escalate

By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.

The bill was expected to pass, but the vote was derailed by petty politics. Senator John Ensign, Republican of Nevada, for example, demanded that the Senate add a multibillion dollar package of tax breaks for renewable energy. Democrats balked — not out of opposition to the tax breaks, which rightly enjoy bipartisan support, but because Mr. Ensign wanted to tack them on to the foreclosure bill without paying for them. That would threaten passage of the bill in the House, which is more committed than the Senate to pay-as-you-go governing.

This sort of delay achieves political ends, like denying Democrats the chance to campaign on the accomplishment during the recess, but it’s exceedingly poor policy. Foreclosures are feeding the nation’s severe economic problems. Turmoil in the financial markets is rooted in the collapse of the housing bubble and will not abate until house prices stabilize and sales pick up. Even Americans fortunate enough to have a down payment and a willing lender are hesitating, understandably fearful of further price drops. Rising foreclosures add daily to the glut of unsold homes, pushing prices down and foreclosures up in a vicious cycle.