Foreclosure Nation: Should The Government Intervene?

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News Item: New York Senator Chuck Schumer is urging Congress to spend $300 million of taxpayer money on counseling and outreach for homeowners facing foreclosure. ‘To be clear, no one is getting bailed out,’ said a statement by John Taylor, president of the National Community Reinvestment Coalition. ‘Borrowers will repay their loans, but at interest rates and with fees that are fair and reasonable.’

This is, to LA Land, anyway, a fascinating subject: what role, if any, should the government play right now regarding mounting foreclosures? A couple of questions, in no particular order:

--Some of these borrowers in trouble are speculators... flippers with bad timing, or bad luck, or bad ideas. Should the government be helping them? Shouldn’t there be some downside risk in speculation?

--Many of these borrowers have already refinanced -- in Colorado, 75 percent of the callers to a state-run foreclosure hotline had already refinanced -- many to borrow against the equity in their homes. The Times, for example, profiled a homeowner who had refinanced so many times he owed $138,000 on a home he had originally purchased for $29,000. So the question is, do you help homeowners who have previously refinanced and taken cash out of their homes, and now can’t pay it back?

Thoughts on this one? Comments?