Many heard Ben Bernanke’s speech in Florida yesterday concerning bank principal mortgage write-downs.  Bernanke painted a very scary picture of the horrible affects that future foreclosures will have on the US economy and urged banks to improve their assitance for homeowners facing foreclosure with a “vigorous response.” 

Of course, the Feds have helped some with the FHA Secure program, HOPE Now Alliance, the 5 year rate freeze and encouraging banks to work with homeowners to avoid foreclosure.  These programs and arrangements made available with many loss mitigation departments have helped but more, much more is needed. 

Bernanke brought into perspective the ability for banks to reduce the principal that struggling homeowners owe on their mortgages.  In fact, he compared reductions in principal balances by up to 50%, to the costs of foreclosure.  He believes banks win; but more importantly, he expresses how the economy will then avoid thousands of foreclosures going forward.

If homeowners, including Florida homeowners, have no equity or are upside down in their home investment; there is no financial incentive for them to even pursue discussions with a loss mitigation department.  Bernanke’s plea gives homeowners everywhere, the incentive to make it, especially where homes have dropped in value.

Here’sone problem that must be pointed out.  If banks are going to reduce mortgage balances for troubled homeowners; what about the homeowners working hard to make their payments on time?  If this is our Government’s new plan, then principal mortgage reductions should happen across the board for every homeowner; right?

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