Home prices plunged by almost a third in major U.S. cities after the housing bubble burst, and the glut of foreclosures has kept the market from rebounding. The seemingly relentless pace of foreclosures also is dampening the demand for new homes, which is one reason construction industry unemployment remains significantly higher than the rate for the rest of the economy.
State and federal officials have tried to delay or avert foreclosures, with limited success. Their most recent, and promising, effort is a settlement that requires the nation's five leading banks to forgive some of the debt of borrowers in hardship, provided that the write-downs would cut the banks' losses over the long haul. But the two biggest players in mortgage finance, Fannie Mae and Freddie Mac, have refused to follow suit. It's a shortsighted position that could lead to billions more dollars in losses from unnecessary foreclosures.
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