On Thursday, Federal Reserve Chairman Ben Bernanke pleaded with the government to do more to stop the foreclosure crisis. It is estimated that lenders are preparing to foreclose on 2.2 million homes this year, that’s twice as many homes in foreclosure than the pre-crisis period. Bernanke offered several plans that the government could follow to stem the foreclosure crisis.

Here are summaries of a few:

  1. Make the “Hope For Homeowners” program available to more homeowners facing foreclosure by easing the terms of the program.
  2. Lower lender’s upfront insurance premium and reduce the interest rate borrowers pay, which is currently 8 percent.
  3. Lower interest rates so that homeowners facing foreclosure are not using more than 31% of their income to pay their mortgage.

Bingo! Number 3 is a winner! This is where the problem began. Homeowners facing foreclosure are now paying TOO much of their income for housing. This is why any little emergency or financial crisis puts these vulnerable homeowners into foreclosure. When a homeowner has little or no financial wiggle room because they’re paying 40% or even 60% of their income for a mortgage, foreclosure is not just a possibility, it’s inevitable.