Proposed SCUBA (Stable, Conservative Underwater Borrower...

There is no shortage of programs now available in the mortgage industry to help ease the foreclosure crisis. Although some of them provide direct financial assistance to key participants in the foreclosure process to encourage them to find a less costly alternative, there is really no national effort to address one of the most stubborn factors that often leads to foreclosure and in some cases thwarts efforts to avoid it. Many borrowers in the U.S. owe more than their house is worth, either on just their first mortgage or in combination with a second mortgage or home-equity line of credit. A First American CoreLogic study recently estimated that 23 percent of all homeowners are in a â€Å"negative equity† position, and the number is†¦show more content†¦These charges are now either included in the closing costs or added as premiums on the interest rate. HARP is only available for performing Fannie and Freddie loans, but that covers a huge portion of the U.S. mortgage market. In a recent article in his nationally syndicated newspaper column on real estate, Ken Harney reported on a new study by Brent White, a professor at the University of Arizona, which argues that many underwater borrowers should intentionally default on their loan and bear the consequences of being shut out of the credit market for a few years. That strategy may be particularly appealing in states where lenders can’t try to recover unpaid mortgages from the borrower’s other assets. Such â€Å"voluntary foreclosures† are one form of a problem that has shaped the foreclosure debate since the government first began devising alternative strategies. Lawmakers and officials in both the Bush and Obama administrations have struggled to find ways to prevent homeowners from using federal assistance when they don’t need it, or profiting from their â€Å"bailout.† That goal has become even more intense since the government was forced to create the $750 billion Troubled Asset Relief Program, most of which has been used to prop up banks and other â€Å"too-big-to-fail† enterprises. A relatively small portion of TARP is being used to pay for HAMP incentives to borrowers, lenders and investors. SCUBA