A couple weeks ago I commented on whether it was in the best interest of the government and/or the banks to bail out struggling homeowners by modified their loans. I have said in the past that it would prolong the agony of the housing market as many of these home owners still would not be able to honor their loan commitments. Ironically a report out today from banking regulators said that “more than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are already in default again”!
This leads me back to what is the best allocation of bailout funds to help the struggling housing market. Should we continue to throw money at the foreclosure problem or should we stimulate the housing market. I contend that by sparking the housing market with stimulus programs we can eliminate future foreclosures by stopping housing price deterioration. Otherwise we just continue to bail out the same people over and over again as home prices continue to fall.
