Caught in the Middle

Federal Reserve Chairman Ben Bernanke again suggested a proposal that mortgage lenders should write down principal for troubled homeowners as a measure to help mitigate fallout from the housing crisis. Not a bad idea necessarily.

But what about those homeowners who are upside down on their mortgages, yet can still afford to pay them and aren't in risk of foreclosure? Do they get to take advantage of such a proposal? My guess is no. If such a homeowner had to sell in this market, however, they could be down by tens of thousands of dollars, which could cause a bankruptcy or at worse severely impact their financial foundation.

It's this group of homeowners caught in the middle -- between the most troubled borrowers and the owners who have plenty of equity -- who I wonder how they'll survive the crisis. Save for one recent article in The Wall Street Journal, no one yet seems to be talking about them. I suspect that soon they'll become a bigger topic, if they're anything like the owners in the Journal article who are also beginning to mail their keys to the bank.