Wall Street Journal – Dukes of Moral Hazard

The Journal’s lead editorial succinctly explains why investors and lenders are uneasy about the big new mortgage plan the president rolled out Wednesday.

Their critique acknowledges that the plan willl help some struggling homeowners. But says President Obama is prolonging the housing downturn, making the eventual rebound harder and not slowing the dec line in hosing prices. The reason – bad borrowers who get government-mandated modifications often still fail after an expensive delay.

“The recent history of mortgage modifications isn’t encouraging. According to the December report by the Comptroller of the Currency and the Office of Thrift Supervision, ‘The number of loans modified in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.’”

 
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