Making sense: modifying mortgages

Then the bank learned that an empty house attracts broken windows, leaky pipes and intruders. Hence, the offer to my friend.

Hiring house sitters with free rent may be one way for lenders to deal with the effects of foreclosure, but I doubt it's going to be taught in banking class.

So what are banks doing now with foreclosures?

The country needs to know because one report predicts that there will be 10 million foreclosures by 2012.

So far, lenders have taken a puzzling course of action that demonstrates the same kind of thinking that got us into the current economic mess.

They are still throwing people out of their homes rather than trying to re-negotiate mortgages with homeowners who can make a smaller but reasonable payment and remain in their homes. Congressman Brad Miller, a North Carolina Democrat, has found that a large number of home mortgages could be re-negotiated to the benefit of both homeowners and banks.

Mr. Miller said back in June, "It seems to make absolute business sense for the person holding the mortgage to modify rather than foreclose or to take a smaller loss selling it rather than a bigger loss foreclosing on it."

This resistance to negotiation is more puzzling because the Obama Administration has set aside $50 billion to help lenders modify mortgages. Until very recently, lenders have not used the money and only 100,000 homeowners nationwide had been able to negotiate new terms that allowed them to stay in their houses.

It is common sense to keep people in their homes. It may be over 75 years from the black deep of the Great Depression, but the damaging experience of foreclosure today hasn't changed much.

Empty homes reduce the value of neighboring houses and worse, if left vacant which is the case for many foreclosed homes today, they become market derelicts, victims of disrepair and vandalism. In Florida, Nevada and California cities, there are whole neighborhoods that are rotting and plunging in value. One expert says that on average, every foreclosure costs the economy $225,000 in lost value.

There are thousands and probably millions of homes that cannot avoid foreclosure. They cannot be saved. But Congress should demand more from the banking and lending industry to make the effort to work with those responsible homeowners who can avoid foreclosure with a reasonable mortgage modification.

Bank of America apparently is making such an effort. It reported recently it doubled its number of modifications. The Treasury Department claims there will be 500,000 nationwide by November. With 10 million foreclosures looming, it's a start.