WRONG
TURN
the president had just acknowledged: the value of the house is
less than what is owed.
There was, technically, a debt
forgiveness option as part of
HAMP, but mortgage companies
weren’t permitted to consider it
until they had tried everything
else to get the payments down,
such as extending the term of the
loan. Even then it was a rarity
— companies are paid based on
the value of a mortgage, so writing-off some of that value didn’t
make much economic sense. As
of June 30, just 60,000 families
had seen some of their debt written off as part of a governmentsponsored modification.
Over the past year the question of whether banks should forgive debt as part of a modification
has emerged as the single-most
contentious issue in the housing
world. Opponents, led by Edward
DeMarco, the acting director of
the federal agency that oversees
Fannie Mae and Freddie Mac,
which control more than half of
all home mortgages in the U.S.,
say it isn’t fair for some families
to get this benefit while other,
more responsible homeowners,
get nothing. They warn of widespread intentional defaults by
HUFFINGTON
11.04.12
people hoping to cash in on the
taxpayers’ largess.
Advocates for homeowners argue
that many families bought at prices
that were fraudulently inflated by
Wall Street banks, which ignored
the quality of the loans they were
packaging and selling in order to
collect big bonuses. (Allegations
repeated in recent high-profile government lawsuits against Wells
Fargo and JPMorgan Chase). Why
should these banks get bailed out
while homeowners get kicked out of
their homes, they argue.
They point to studies that have
also shown that principal forgiveness lowers foreclosure rates, which
is good for everyone — including
the taxpayers, which now essentially own Fannie and Freddie.
At ground level, perspectives
differ. Some homeowners are simply happy they got some relief, and
figure they can always sell in a few
years when prices recover. Others say their homes are worth so
much less than what they paid that
it seems likely that their modification is just a stay of execution.
Solis fits both categories — she
is grateful, but also worried. Her
home loan was modified with little
fuss by her mortgage company,
First Franklin, she said in a recent