Why is the Government Modifying Mortgages?

Peter Viles writes:

The L.A. Times today leads the newspaper with a look at Countrywide’s plan to modify up to 395,000 mortgages — 125,000 in California — to make the mortgages affordable to buyers who are living in houses they otherwise can’t afford. In some cases, those modifications will result in borrowers paying just 2.5% interest on their mortgages.

The Federal government took action last summer to encourage mortgage modifications by putting government guarantees behind the new mortgages, but for whatever reason that program doesn’t appear to be attractive enough to banks. Pimco’s Paul McCulley accurately described the basic unfairness of that effort months ago:

It runs against the streak of
basic fairness in a lot of Americans. You’re going to provide a handout
to the fool.
The fool is going to be rewarded and I, the taxpayer, will
be put at risk at the margin for that handout to the fool. When all I
did was exactly what I was supposed to do. Where is the fairness here?
It’s a hard question to answer.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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