A lack of equity

Nevada has had the dubious distinction of having one of the highest home foreclosure rates in the country, and it doesn’t look as if that will change anytime soon.

With the prolonged recession, many homeowners are unable to make their full payments because of layoffs or pay cuts. Others are feeling the sting of adjustable-rate mortgages. Selling the house is not typically a good option. In December, more than half of all homes in Nevada were “upside down,” meaning the value of the home was less than the value of the mortgage.

As Brian Eckhouse reported recently in the Las Vegas Sun, that situation has put many homeowners in a quandary: Do they try to find a way to stay and pay their mortgages or do they call it quits and walk away?

There really shouldn’t be a quandary. A mortgage is a mortgage. The people who bought homes should be expected to abide by the terms of their loans. Unfortunately, it’s not that easy, and not just because of the sour economy.

Some financial advisers say homeowners who are trying to do the right thing could face foreclosure because they aren’t in enough trouble. Government programs don’t touch many upside-down mortgages, and the lenders who are willing to negotiate with homeowners often wait until mortgage payments are at least three months behind. At that point, homeowners’ credit scores are ruined and it is probably too late to salvage the mortgage.

It’s no wonder some homeowners are ready to walk away from their homes — the lenders walked away from helping them. Adding to homeowners’ frustration is the fact that many of the big Wall Street firms contributed to the financial crisis by making risky loans during economic boom times. Those firms have received billions of dollars in federal bailout money because they are “too big too fail” — unlike the average homeowner.

That is unfair. Congress and the Obama administration should put a greater emphasis on helping the responsible homeowners who are trying to take responsibility for their situation after ending up there through no fault of their own.