Treasury Pushes Mortgage Firms for Loan Relief

Here is the problem: there are no viable options for salvaging mortgages when the value of the property is 30-40% less than the mortgaged amount. Who eats the loss? The homeowner? The bank? Taxpayers? All of the above?

Furthermore, how many mortgages are in default because buyers simply cannot afford a home regardless of the loan modification terms? What percentage of defaults are a result of unemployment and how do you modify a loan for someone without income?

Broad mandates from the Federal government simply cause further market and economic decisions that are decidedly stupid.

Treasury Pushes Mortgage Firms for Loan Relief

The administration said Monday that it would increase the pressure on banks to help troubled homeowners permanently lower mortgage payments.

The Treasury Department said that mortgage servicers would be required to submit plans on how they would decide whether a loan would be permanent modified. Bank that fall short of the guidelines of their agreement could face fines or sanctions, the Treasury said.

Monday’s push was the latest evidence that a $75 billion taxpayer-financed effort aimed at stemming foreclosures was struggling. Even as lenders have accelerated the pace at which they are reducing mortgage payments for borrowers, most loans modified remain in a trial stage lasting up to five months, and only a tiny fraction have been made permanent.

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There really is only one solution: let the marketplace work and let the lenders and borrowers take the heat. It's not pleasant, but it will be better in the long run. Those of us with homes that have lost value [roughtly 90+%] have the choices to either stay and pay or leave and pay. Eventually, the home market will recover and so will home prices. It may take quite a few years, but it will be a lesson worth learning and heeding in future.