Mortgage Relief

Solution

   To prevent this from happening, the federal government should consider paying the interest on troubled mortgages as a temporary measure until the economy recovers.

   Much like a college loan program that 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 that will prevent the mortgage from defaulting.

   To prevent abuse, the program may be limited to only pay the interest on troubled mortgages up to five years if the homeowner files for hardship. A five-year period should be long enough for the unemployed to find a job. Another restriction may be that the program may only apply 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 less than inheriting the entire mortgage itself (as with Fannie Mae/Freddie Mac).