Over the past year, we have seen a wave of foreclosures that is expected to become a tsunami by March of 2008. The federal government has taken several steps to provide homeowners with relief:

Homeowners that are current on their mortgage payments prior to the time when the rate on their ARMs (adjustable-rate mortgages) are scheduled to reset and who have 3 percent or more equity in their property can refinance with fixed-rate mortgages backed by the FHA (Federal Housing Authority). Under this plan, an estimated 80,000 homeowners will qualify for relief.

With the Mortgage Forgiveness Debt Relief Act of 2007, signed into law by President George W. Bush on December 20, 2007, homeowners no longer are required to pay taxes on the amount of debt that a lender forgives.

In other words, if homeowners negotiate a short sale with their bank (in which the bank agrees to accept a full payment of less than what is owed on the mortgage), the homeowners do not have to pay income tax on that amount of debt that's been forgiven. However, the bill covers only those mortgage agreements that have been entered into after January 1, 2007 and before December 31, 2009. The Mortgage Forgiveness Debt Relief Act of 2007 is available on mortgage indebtedness of up to $1 million and extends the mortgage tax insurance deduction for three years.

The administration is reaching out to groups that offer foreclosure counseling and refinancing, including organizations like NeighborWorks America, mortgage lenders and loan servicers, FHA, and government-sponsored enterprises like Fannie Mae and Freddie Mac. This initiative has several goals, including expanding mortgage financing options, identifying homeowners before they face hardships, helping them understand their financing options, and allowing them to find a mortgage product that works for them.

Although these actions are certainly steps in the right direction, some of the restrictions in place limit the number of families that will qualify for assistance. I recommend some broader actions designed to provide more homeowners with assistance and give them more time to get back on their feet or get out from under a home they cannot afford:

1. Reset all adjustable-rate mortgages to the rate that was in effect after the first adjustment. For example, if the initial rate was 3 percent and it increased to 5 percent at the first adjustment period and then 7 percent at the second adjustment period, reset it to 5 percent.

2. Lenders should negotiate with homeowners to allow them to move at least three months of payments to the end of their mortgages. This will give homeowners a full quarter to catch up on payments.

3. On forced escrows, instead of requiring that homeowners catch up on payments over 12 months, extend the catch-up period to 60 months or add the amount owed to the end of the mortgage.

Currently, many homeowners with adjustable-rate mortgages are not required to make monthly payments into an escrow account to cover property taxes and insurance. When the payments come due, they don't have sufficient funds to cover these payments, so the lender forces them into starting an escrow account. Now, they not only have to make regular payments into the escrow account to cover the next scheduled payments, but they also have to catch up on back payments. For example, if they typically pay $3,000 per year in homeowner's insurance and property taxes, their monthly payment increases by $500 per month ($250 to cover the next year's bills and $250 to catch up on last year's bills).

By extending the catch-up period to 60 months, the monthly payment would increase only by $300 ($250 to cover the next bills and $50 to catch up on last year's bills). Another option would be to add the total amount owed on the previous year's bills to the end of the mortgage and then recalculate the monthly payment including the $250 per month to the escrow account for making the future payments.

4. Educate consumers. Far too many homeowners are borrowing beyond their means. Prior to taking out a mortgage loan, borrowers should be required to receive counseling to ensure that they borrow responsibly, are aware of their rights, and know how to comparison shop for low-cost loans.

Precedence for related consumer safeguards can be found in the reverse mortgage arena, which contain numerous safety features to reassure seniors and their families that they retain their rights, and as a result, do not put themselves, their home, or their family at financial risk. These protections are mandated by federal statute and ensure that the homeowner is informed about reverse mortgages and other options available to them at the time they seek their mortgage.

Before a reverse mortgage application can be processed, the prospective borrower must first meet with an independent counselor.

This may seem like a very simple solution to a very complicated problem, but we have to stop the bleeding right now, so homeowners can transition into a long-term solution. Right now consumers and lenders both need a tourniquet to keep consumers from losing their homes and keep the lenders from having to repossess homes that they can't resell for enough to cover expenses. This solution will give everyone a better buffer to soften the landing. We need to get serious about cooling this mortgage meltdown and putting policies in place that prevent it from ever happening again.

Published: February 26, 2008

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Once dubbed by TIME Magazine "the best-selling REALTOR® in America," Ralph R. Roberts, CRS, GRI is an award-winning and internationally recognized real estate agent, author, coach, and speaker. Throughout his career, Ralph has proven his commitment to helping other real estate and sales professionals build upon their past and present success, grow and expand their businesses, and provide a rich and rewarding future for themselves, their customers, their employees, and their families. As president and CEO of Ralph Roberts Realty, Ralph has personally helped thousands of consumers realize their dream of homeownership. While selling over 10,000 homes (and buying and selling over 3,000 investment properties) throughout his 30-year career, Ralph has made the time to mentor and coach hundreds of professionals in real estate, sales, and a host of other fields. Ralph is a recognized authority on Real Estate and Mortgage Fraud; Residential Real Estate; Personal Salesmanship; and, Sales Force and Office Management, Motivation, and Design. Ralph's numerous websites, blogs, seminars, and speaking engagements engage, entertain, and educate both consumers and professionals. Ralph is also an accomplished author with several successful titles to his credit, including: Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team Mortgage Myths: 77 Secrets That Will Save You Thousands on Home Financing (John Wiley & Sons) Foreclosure Self-Defense For Dummies (John Wiley & Sons) Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan) Foreclosure Investing For Dummies (John Wiley & Sons) Advanced Selling For Dummies (John Wiley & Sons) Flipping Houses For Dummies (John Wiley & Sons) Walk Like a Giant, Sell Like a Madman (HarperCollins) Real Wealth by Investing in Real Estate (Prentice Hall/Penguin Group) Sell it Yourself (Adams Media) 52 Weeks of Sales Success (HarperCollins) To learn more about Ralph, visit AboutRalph.com or check out his daily insights on real estate and mortgage fraud prevention at FlippingFrenzy.com. You can reach Ralph at RalphRoberts@RalphRoberts.com or by calling (586) 751-0000.