Popular mortgage "mods" fuel moral hazard


	Popular mortgage "mods" fuel moral hazard

Forbes Markets

10-24-2007 8:25 AM

702 views

tags:

banking, subprime mortgages, u.s. economy, wall street

Forbes Markets says:

This analysis examines the view that the loan adjustments are little more than a bailout of bond buyers who were paid to take greater risks in the first place.

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/8b2ddada-5c70-4a47-9d5e-6f4a51fc2834/22CF0E68-97BF-49F2-A7AB-A36AED00591F/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.reuters.com/article/reutersEdge/idUSN2244667820071024" href="http://www.reuters.com/article/reutersEdge/idUSN2244667820071024" style="font-size: 11px;">www.reuters.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.reuters.com/article/reutersEdge/idUSN2244667820071024"><P>Mortgage companies scrambling to ease the terms on thousands of loans destined for default may be doing more harm than good by rewarding investors and homeowners who took on excessive risk.</P><SPAN id="midArticle_1"></SPAN>
<P>Efforts to help Americans pay their mortgages have forced companies such as Countrywide Financial Corp (CFC.N: <A href="http://www.reuters.com/stocks/quote?symbol=CFC.N">Quote</A>, <A href="http://www.reuters.com/stocks/companyProfile?symbol=CFC.N">Profile</A>, <A href="http://www.reuters.com/stocks/researchReports?symbol=CFC.N">Research</A>), the largest U.S. mortgage lender, to expand their practice of loan modifications, which lower payments for borrowers vulnerable to foreclosure. Countrywide on Tuesday said it would refinance or modify $16 billion of loans.</P><SPAN id="midArticle_2"></SPAN>
<P>While such concessions are largely a win-win situation for the parties involved, since homeowners keep their homes and the bank reduces losses, the practice may exacerbate a credit crisis that began in July and is leading to growing cries of foul in the $7.2 trillion mortgage bond market.</P></blockquote></div><div style="margin: 0px 6px 6px 4px;"><table style="font-size: 11px;border-spacing: 0px;padding: 0px;" cellpadding="0" cellspacing="0" width="100%"><tr><td style="background:transparent;border-width:0px;padding:0px;">&nbsp;</td><td align="right" style="background:transparent;border-width:0px;padding:0px;width:107px" width="107"><a href="http://clipmarks.com/share/22CF0E68-97BF-49F2-A7AB-A36AED00591F/blog/" title="blog or email this clip"><img src="http://content9.clipmarks.com/images/c2b-foot.png" border="0" alt="blog it" width="107" height="17" style="border-width:0px;padding:0px;margin:0px;" /></a></td></tr></table></div></div>

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