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 the homeowner's financial situation recovers.

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

   To prevent abuse, the program may be limited to only pay up to five years if the homeowner files for hardship. Five years should be long enough for the unemployed to find a job in order 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.

   Monetary-wise, having the government pay the interest on a mortgage during a five-year period is far more cost-effective than inheriting the entire mortgage itself (as with Fannie Mae/Freddie Mac).