It's the lost jobs, not the mortgage payments

Filed under the category "no easy solutions to the foreclosure crisis" comes a report at CNN/Money about how the recent White House plan to rescue homeowners by lowering their mortgage payments may be a bit wide of the mark given all the recent job losses.

Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Obama's plan to stem foreclosures by modifying loans.

Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.

Normally, foreclosures are an after-effect of recessions - people lose their jobs, then they lose their homes because they can't make their mortgage payments. It seems as though we're now just entering that phase after the loss of 3.7 million jobs over just the last six months.

What's the solution? Naturally, it's the same solution that has been offered for nearly every phase of the financial crisis - more money from the government.

Since the government owns or guarantees most of the mortgages in the U.S. these days, it's more than a little funny that one agency in Washington D.C. would be lending you money so you can make a payment that winds up in another Washington D.C. office.

The economists suggest that the government could instead replace part of an individual homeowner's lost income from a job loss through loans and grants and help those whose predicament is more permanent become renters.