On the House: Mortgage help for the jobless?

A couple of weeks back, Croydon homeowner Theodore Frimet shared what happened when he tried to navigate the turgid waters of mortgage modification.

His advice: Persist in the effort.

Others are not so certain the direction the country is taking on this issue is the right one, and I would be remiss if I did not give them an opportunity to speak.

Unemployment has replaced toxic subprime loans as the leading cause of mortgage delinquency and foreclosure. Efforts to help the unemployed keep their houses are growing.

Mike Aceto of Kennett Square readily acknowledges the effects unemployment has on those affected.

"When it occurs, it never seems to happen at a good time for anyone," he says. "It disrupts lives and can devastate families. It is both a personal and public experience."

What concerns Aceto is a "wave of proposals" to assist unemployed people in modifying their mortgages.

The administration's Home Afforable Modification Program doesn't include the unemployed because jobless benefits aren't income.

Unemployment - or, more precisely, reduced income, because it could mean that due to "concessions," for example - has always been a reason for foreclosure, says Paul Willen, a Boston Fed economist.

The difference between always and now, however, is that when home prices were rising, the unemployed could fall back on their equity, sell the house, and escape with credit scores intact to wait for better days.

Now, many houses are worth less than their owners paid for them. Foreclosure is often the only option.

"Isn't unemployment compensation designed to help those who are unemployed pay their bills?" Aceto asks. "Why should we, as taxpayers, directly subsidize a restructuring of an unemployed person's financial obligations because they lost their jobs?"

John Dodds, executive director of the Philadelphia Unemployment Project, replies that jobless benefits provide 50 percent of a person's former income, "so that can create a difficult situation for maintaining mortgage payments."

The severity of the current recession is keeping people out of work for longer periods. About 1.5 million people are expected to exhaust all unemployment benefits by the end of the year, Dodds says.

According to the U.S. Department of Labor, as of July there were 2.4 million full-time permanent jobs open, with 14.5 million people officially unemployed.

Moody's Economy.com chief economist Mark Zandi believes foreclosures driven by unemployment will rise precipitously after the first of the year, and drops in home prices will resume.

Housing has consistently led the nation out of recession in the past, and unless we can stabilize the housing market it will be difficult to revive the economy, Dodds says.

"Unless we slow the flow of foreclosed properties pressing down housing prices and depressing neighborhoods, recovery will be slow and painful."

Inquirer real estate writer Alan J. Heavens is the author of "Remodeling on the Money" (Kaplan Publishing). His columns appear Fridays in Home & Design. "On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.