Thursday, April 22, 2010

Mortgage write-downs: Are they fair?

Should your neighbors get a chunk of their mortgage permanently written off because their income has fallen, they can't afford their payments and their home's value has fallen?

Meanwhile, your house has also lost value. But you've been fortunate enough to keep your job. Or bought at a lower price. Or have a lot in savings. Or, for whatever reason, you can afford your payments. So you don't get a deal. You might get irked, start demanding a cut. Maybe you would fall behind on purpose, trying to get a reduction. (By the way, that probably won't work, and it will mess up your credit.)

Those are among the concerns as writing off mortgage principal gains traction as a tool to prevent foreclosures.

Critics of mortgage modifications in general say people who can't afford their homes should give them up and move. Normally, that's what happens, but we haven't seen normal in a long time.

Foreclosures are a noose around the housing market's neck, and that won't change for a long time.

President Obama's well-intended efforts to help distressed homeowners have fallen short. Some problems, like program complexity and inept service from lenders, were probably avoidable.

But entrenched unemployment makes it hard to keep people in their homes, and deflated values make people less interested in hanging on. That's why we've seen several programs trying to help the jobless. And that's why principal reduction is gaining interest.

So what do you think: Is writing off mortgage principal a good idea for foreclosure prevention? Click here to vote.


Anonymous said...

How is it the neighbors business? We're not talking about the government bailing the homeowner out, its a business decision between the lender and the borrower. The bank has to decide if having one more foreclosure is better than simply taking a smaller profit and allowing the homeowner to stay in the house. As you said, normally people who can't afford their house would sell it and move. But the housing market is out of whack big time. There are so many homes out there that are foreclosures or are short-sales that selling and covering your principle and Realtor fees and other closing costs is often impossible. Plus if you do go ahead and foreclose, it will actually effect your neighbors property value. So even though its none of their business, your neighbors should be in favor of it. -Again, we're not talking about tax dollars.

Anonymous said...

Stella, only if it is an agreement between the lender and homeowner. If the government forces the lender into a new agreement, that is where I would disagree. We still have laws in this country and contract law is still valid.

Anonymous said...

In Phoenix a family was on TV protesting the loss of their home and demanding a mortgage reduction. Their $200,000 mortgage had ballooned to over $600,000 by refinancing and using the home as an ATM. And people were supporting these scum. Even though they only made about $50,0000 a year. Finally they got what they wanted and their mortgage was written down to about $150,000.

This infuriates me. The present administration and many politicians have committed almost treason by selling our country out and rewarding scum like this.