What Will it Take To Halt the Housing Crisis?

A new report by Melinda Fullmer of MSN Real Estate points out that the housing crisis is deepening into a viscious cycle, where foreclosures have led to an economic downturn, which has led to joblessness, which is leading to yet more foreclosures. Among the suggestions to solve the spiraling crisis:
* President Barack Obama is seeking is a change to federal bankruptcy laws that would allow federal judges to restructure mortgages of struggling borrowers. Legislators are considering laws that would allow judges to reduce the principal or "cram down" the amount owed for the primary residences of borrowers who have sought Chapter 13 bankruptcy protection. Chapter 13 is a bankruptcy status that allows debtors to retain assets and pay back their debts over three to five years. Judges can currently modify the terms of credit-card and other debt, including vacation homes, but haven't been able to modify primary residences since 1979, when the U.S. bankruptcy code was enacted.

* A government program to have mortgage write-downs has also been suggested. It's costly, but at the end of the day, not doing that and allowing these millions of dollars to go into foreclosure will cost more people their jobs.

* Economists and industry analysts are urging government to back low, incentive mortgage rates that lenders can offer to qualified buyers, especially those in high-foreclosure areas such as California, Nevada, Florida, Arizona, Ohio and Michigan. To be sure, rates are already historically low, with the benchmark 30-year fixed-rate mortgage falling 5 basis points, to 5.28%, the week ending Jan. 16, according to the Bankrate.com national survey of large lenders. The Treasury is working on a plan to get rates down to 4.5%. But rates as low as 3.5% would help offset declining values, getting more people off the fence and improving the character of communities.

Read the full story here.