Mortgage Relief

Solution

   To prevent this, the federal government should consider paying the interest on troubled mortgages that apply for hardship as a temporary measure until their financial situation recovers.

   For example, college loan programs allows the interest on loans to be deferred until the student graduates to resume payments. If something similar was done for troubled mortgages during an economic downturn, the financially distressed will be provided some relief while the banking institution will continue to receive payments from the government that pays the mortgage's interest preventing the default.

   To prevent abuse, the program may be limited to only pay interest on failed mortgages up to a five-year period if the homeowner files for hardship. Five years should be long enough for the unemployed to find a job to resume payments. Further restrictions may be that the program only applies for primary residences (not multiple homes), and that a homeowner may only apply once during their lifetime.

   If this policy had been in effect years ago, it could have prevented a large number of mortgages from defaulting that caused the Great Recession in America. Monetary-wise, having the government pay the interest on a mortgage during a five-year period is much more cost-effective than inheriting the entire mortgage itself (as with Fannie Mae/Freddie Mac).