More on Those White House Anti-Foreclosure Efforts

Megan pointed this out more than a week ago, but today the editorialists at The New York Times are also highlighting the central flaw of the updated foreclosure prevention program announced by the White House last month: While the government offers financial carrots to entice the banks to rework mortgages in order to prevent foreclosures, there are no sticks to force the hands of those lenders.

Those efforts would reduce the monthly payment and restore some home equity, but as with earlier antiforeclosure efforts, lenders are not required to help. Despite government incentives to modify bad loans, lenders might wait to see if bigger incentives are offered later. They may also prefer foreclosure to modifications because the long foreclosure process lets them postpone taking losses.

Housing advocates have been pushing a series of proposals they say would tackle the problem — everything from mortgage bankruptcy reform to mandatory principal write-down programs. So far, though, all federal efforts to curtail foreclosures have hinged on the good will of the nation’s banks.