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BOB MOON: While the market waits for the Fed to help it out of the current mess, many homeowners with dicey loans are looking elsewhere. About 2.5 million people are expected to foreclose on their homes before the housing crisis is over. Congress and state officials are stepping in to try and help the situation, offering alternatives to borrowers and lenders. But for all the good intentions, not much is changing.
Stacey Vanek Smith takes a look.
STACEY VANEK-SMITH: Eight states have invested nearly a billion dollars into helping people keep their homes. The programs let borrowers refinance so interest rates don't jump and put mortgage payments out of reach. The thing is, the programs have been a flop.
Boston Globe reporter Binyamin Appelbaum examined the state programs and found that all told, fewer than 100 loans have been refinanced. He says states are providing the wrong kind of help. These refinancing programs are intended to reach people can afford their loan now, but they won't be able to afford it in a month or two. Appelbaum says the problem is, most of the people seeking help can't afford their loan payments now, so freezing the interest rates won't help.
Housing economist Christopher Thornberg says states just didn't anticipate the size and severity of the problem.
CHRISTOPHER THORNBERG: The amount of debt people have picked up is way too much for them to afford and they did so on an irrational expectation that prices were going to continue to go up.
So states and federal authorities are leaning on lenders-asking them to reduce the value of mortgages so people owe less. Bruce Marks is CEO of the Neighborhood Assistance Corporation of America. It recently brokered a deal with Countrywide that reduces payments for homeowners.
BRUCE MARKS: States needs to demand the lenders, if you want to do business in my state, we require you to restructure the loans, reduce the interest rates to what homeowners can afford.
Marks says under that scenario, everyone gets some return. Meanwhile, many states are considering scrapping their current programs. To try and find a better solution.
In Los Angeles, I'm Stacey Vanek-Smith for Marketplace.