Let's start at the beginning, with the housing bust, the result of which was the foreclosure crisis, the main problem of which was the fact that 1) people had mortgages they couldn't afford, could never have afforded (in many cases) on 2) homes no longer worth the outstanding debt.
The time-tested free market resolution involves foreclosure, which rather efficiently transfers property from those who don't have the wherewithal to continue to own it, to those who do, at a market price. The larger real estate market resets in a timely manner, with assets either liquidated or transfered, as has happened for most of modern economic history. One key element to this whole health-restoring process is that it also sorts out lenders who can make it, and those that can't. That has to happen also in a timely manner so that those with the soundest books can survive.
So, you now can perhaps understand how this whole perversion of that process, called mortgage modification, ultimately undermines the restoration of the whole real estate/lender/institutional market health and recovery.
Read an excellent post from Hot Air: "Surprise: Lenders not keen on mortgage modification for people who can’t pay"
From the first graph: "After all, if our nation’s universities did a better job of educating people on basic economics, the fact that banks don’t want to waste money and time modifying mortgages for people who are bad risks wouldn’t make news at all, let alone front-page news at the Washington Post.
Read the rest: http://hotair.com/archives/2009/07/28/surprise-lenders-not-keen-on-mortgage-modification-for-people-who-cant-pay/
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