The Federal Deposit Insurance Corp found that a foreclosed mortgage pays 30 cents on the dollar in the current environment while a modified mortgage pays nearly 90 cents, the senators said.
Now there is politician math for you, seems they forgot to mention that when they did the modification they marked the property to market, taking an immediate loss on the difference!
The problem is that people holding an exotic loan with a minimal monthly payment are not going to be fixed unless they are able to lower the monthly payment! That means that if they convert them to a fixed loan, the payment is going to have to be lower than the payment they cannot make now. So if you re-hook them up with a low front end payment loan again, all you do is prolong the problem!
All that is going to happen anyway, is they are going to have to bulk sell the foreclosed properties to raise capital and then the bulk foreclosed properties are going to hit the market crashing the housing market further.
If the government did not have it's hands in trying to create a Utopian economy, we would not be in the situation we are in now. The government says that we shall have no unemployment and zero inflation per Humphrey-Hawkins, so they will continue to meddle and buck free market forces until our Federal Reserve Notes are backed by fifth generation tax payers and used car loans.
Derb
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