Foreclosures continue to offer problems to the U.S. housing market and, by extension, to the rest of the U.S. economy. And the tide of foreclosures is not expected to abate any time soon. Even with efforts by the President and his advisers to try and reduce foreclosures, there are some fundamental issues with the attempts at foreclosure prevention. The New York Times reports on one of the issues with foreclosure prevention:

One of the biggest problems is that the plan focuses almost entirely on lowering monthly payments. But overly onerous payments are only part of the problem. For 15.4 million “underwater” borrowers — those who owe more on their mortgages than their homes are worth — a lack of home equity puts them at risk of default, even if their monthly payments have been reduced. They have no cushion to fall back on in the event of a setback, like job loss or illness.

Indeed, what happens if something devastating happens? The lower payments won’t stop foreclosure in those cases. And with the economy still in recession, job loss is still an issue. The New York Times believes that principal reduction is the answer. However, I think most mortgage lenders would balk at such a measure. Perhaps another mortatorium on foreclosures is in order, one aimed at those experiencing financial hardship due to the recession.

Do you think anything can help stem the tide of foreclosures?