A couple of quotes from an article by James Hagerty in the WSJ: Is Slashing Mortgage Principal the Answer?
… Assistant Treasury Secretary Michael Barr … suggested that there would be a risk that such a [principal] program would change a lot of borrowers’ behavior. “Most people, most of the time, make their mortgage payments … even if they’re underwater,” Mr. Barr noted. “You have to be quite careful not to design a program that induces more people to walk away” …
And another quote from the WSJ:
Tom Capasse, a principal at Waterfall Asset Management LLC, a New York-based investor in mortgages, says it’s too late to prevent a “seismic shift” in borrower behavior … “There used to be a scarlet D on your forehead if you defaulted,” says Mr. Capasse. “Now it’s a badge of honor.”
I like what Diana Olick wrote at CNBC: Are Principal Writedowns the Answer to Housing Crisis?
I would honestly rather see my home’s value go down than see the guy next door … who made a poor/negligent financial decision get a mulligan at my expense. I think that would be the overwhelming public reaction.
File Under: Grow up and be responsible!