Secretary Paulson answers the question about what the administration is doing for homeowners by saying that they are increasing the access to low cost mortgages (Fighting the Financial Crisis, One Challenge at a Time, New York Times, November 18, 2008: A23). It is clear from what he wrote that he just does not get it. People already have mortgages, their lenders refuse, or are unable, to renegotiate the mortgages, so that people are facing foreclosure.
What we need is a totally different approach that will enable people to pay their mortgages with government help and thus remain in their homes. This will contribute to stabilizing the housing market and, perhaps more importantly, stabilizing neighborhoods.
Some version of a plan involving a Shared Appreciation Mortgage would be an appropriate response. In such a plan, the homeowner pays what he or she can, the government pays the remainder of the monthly mortgage. Over time both build up equity in the house which they share proportionally when the house is sold.
If Mr. Paulson is unwilling to consider such a plan then he should be replaced by someone more in touch with the problems facing Main Street.
Sent to New York Times