Five million Americans have seen their houses reclaimed by lenders. Thirteen million more will be forced out by 2015. Time to change the system akin to Canada. In Canada about 1% of mortgages are in foreclosure or delinquent compared to about 14% of American mortgages.
Time for the federal government — Fannie and Freddie – to get out of the mortgage business. Time for local banks to take over. Local banks are likely to impose stricter standards and work with borrowers to help them fulfill their obligations.
Research shows that low-income home buyers who borrowed from a local lender between 2005 and 2008 had markedly lower rates of default and delinquency than those who used more distant banks or mortgage companies says Ohio State University Prof. Stephanie Moulton.
The result will be homeowners acquiring more equity in their homes and fewer defaulted mortgages. Instead of deducting mortgage interest from taxes let people deduct payments on principal. By forcing banks and consumers to put more skin in the game, Congress could help head off the next housing crises. The best way is to make sure that Americans own as much of their homes as they can.
