Thursday, February 19, 2009

Barack Obama's Mortgage-Relief Plan Rewards Fraud and Defaulters - WSJ.com

Wall Street Journal: Barack Obama's Mortgage-Relief Plan Rewards Fraud and Defaulters - WSJ.com: "The recent history of mortgage modifications isn't encouraging. According to the December report by the Comptroller of the Currency and the Office of Thrift Supervision, 'The number of loans modified in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.'

Said Comptroller John Dugan, 'One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months.'"

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This is a detailed and basically negative analysis of the Obama proposal. The biggest hole in the proposal that I see is the text I cut and pasted above. You can save people from default today, and you can give them a lower payment, but more than half of them will just default again. Some people will be helped, and that is a good thing, but is it worth the price?

The problems in the economy started with mortgages and housing prices, but now we are dealing with broader economic issues that will not be solved by fixing house payments at more reasonable levels.

1 comment:

Anonymous said...

Great post. I also liked radio host Kevin Price's article at www.BizPlusBlog.com. This bill will shut down middle class home ownership.