Treasury To Fix the Foreclosure Program

All I can say on this topic is if you are trying to get a loan modification then good luck.  I guess we will see what comes of it but again don’t get your hopes up even when they are talking about doing principle reductions, again. 

Even though I do think the only correct way to modify the loans is to do a principle reduction it does create a moral hazard and many will try to get one even though they don’t need it.  One person can ruin it for everyone.  I feel very bad for those who legitimately could afford their home but are now unable to because their income has be reduced or they lost their job.

“Many economists and mortgage experts have concluded that banks must ultimately forgive loan balances to restore equity to underwater borrowers. Otherwise, growing numbers will walk away from their homes and accept foreclosure rather than make payments on properties in which they no longer own a stake.  The Treasury has resisted calls to push lenders to write off loan balances, concerned that such a course would either threaten the health of banks by forcing them to swallow billions of dollars in write-offs or cost taxpayers additional money.”

http://www.nytimes.com/2010/01/22/business/economy/22modify.html