As the result of interest rate cuts by the Federal Reserve, resetting of subprime loans have become less painful.   But this is proving not to be the main cause of foreclosure. 

According to the Economistt….

"An influential study from the Federal Reserve Bank of Boston points to falling house prices, and the resultant negative equity, as a far bigger trigger. Stemming foreclosures, points out Paul Willen, an author of the study, will depend on reducing the size of mortgages relative to the value of a house.

One approach under consideration in Congress is to adjust America’s personal_bankruptcy law so that judges can "cram down" a mortgage to the market value of a house. Under current law, judges cannot reduce the debt on someone’s main residence, though they can do so for holiday homes or investment properties. Proponents of the legislation reckon 600,000 people could avoid foreclosure if the rules were changed."

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