It has taken a while, but even the Bush administration, long in denial about the broad negative effects the mortgage crisis is having on individual borrowers, entire neighborhoods, and the national economy, has come around to recognizing that there is a necessary and appropriate role for government in solving the problem. As with other serious crises that have happened on Bush’s watch, the solution is to make it the next administration’s problem.
The five-year freeze is a welcome opportunity for the subset (no more than 30 percent) of borrowers put into suspended animation. But it also fails to address the needs of the people whose rates have already reset or the growing number of borrowers who are creditworthy but have negative equity in their homes as a result of widespread foreclosures and who have no way to get out of their challenging loans. It also does nothing to restore faith in the smooth operation of our financial system, when breakdowns in the credit market can accelerate the economic downturn or contribute to a recession. The administration can and should do more.