Mortgage Modification Talk Swirling
February 6, 2009
The new Treasury Secretary Tim Geithner is set to hold a press conference on Monday to discuss his new plan for helping the economy get back on its feet. It’s not clear exactly what will be proposed, but one of the latest efforts which is being talked about is the government using some $100-150B, and possibly more, of the second $350B of bailout funds to modify troubled and underwater mortgages to market rates.
This might bring some sort of stability to the market in the near term – possibly enough to get the credit markets to thaw – but mortgage modifications raise a few key issues. First and foremost, there was a dramatic amount of fraud and deceit in the mortgage markets, something which such a plan would not only address, but instead seems to reward.
Secondly, you have many markets which are still overpriced when considering historic underwriting and mortgage to income ratios. How does a mortgage modification ensure that in 12 months when prices fall further those same homeowners won’t again be in trouble. I recall watching an interview on TV about a month ago where one of the large banks’ CEO indicated that more than 1/3 of mortgage workouts were again running into trouble.
Third, what about the homeowners who already lost their homes who would have benefitted under such a plan?
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let the redistribution of wealth begin. i still think obama is better than mcsame, but this nonsense has to stop. people who made unwise decisions need to pay the piper, and if deceit was involved on the part of those individuals who perpetrated the fraud, then those people should be sent to guantanamo instead.
the answer to your last question is that those people get something too. a selective finger.