Urgent Need to Buoy Home Prices?

Christian Science Monitor (02/22/08) P. P3; Trumbull, Mark
The negative feedback loop of falling home prices, which leads to a tightening of credit and the likelihood that more borrowers will default on their mortgages, presents a tremendous risk to the U.S. economy. The Bush administration has urged mortgage lenders to modify the loans terms for borrowers who are struggling to make payments, but some policymakers want the government to go further--such as imposing a temporary freeze on foreclosures or becoming a buyer of mortgage securities and then altering the terms of the loans underpinning them. Still, some observers say there will be political and financial limits to what the government can do to stabilize the real estate market. Moreover, they add that the market always finds a way to stabilize itself and that buyers will return once prices become attractive again.