The debate over helping homeowners who now are faced with a mortgage that exceeds the value of their homes is gaining a broader audience; the issue is fraught with many different potential landmines for homeowners, lenders, credit markets, and the economy. 

Among our team we have a very wide range of opinions on the matter, and are constantly seeking out new information on the issue.  On one point we agree, however, and that is the fact that in most markets, single family housing is overpriced (in some markets still significantly overpriced), and that reduction in prices to restore affordability is key to restoring equilibrium.  Getting there is the issue. 

Today’s media provides a couple of opinions on the matter –

Martin Feldstein, Harvard prof, WSJ contributor, and chairman of the Council of Economic Advisors under Reagan, offers “How to Help People Whose Home Values are Underwater” in the WSJ today.  We agree with his intent to address the increasing propensity of underwater homeowners to default, though his approach offering a recourse mortgage mix seems somewhat counter-intuitive. 

Barry Ritholtz has proposed earlier this year what he’s called the 30/20/10 plan, and he revisits the idea in a post today titled “How Should We Help Underwater Home Owners?”  BR’s plan isn’t perfect, but we do heartily agree with the main point of his post today – home prices are overpriced and must fall to a price range that is readily supported by the market – the natural price level. 

How will the issue eventually be resolved?  You guess is as good as anyone’s at this point – at least some folks out there are proposing plans with potential. 

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