Attempts at Relief and Reform

Principal Write Downs

Posted on Thursday, April 15, 2010

This weeks House Financial Services Committee hearing only reinforced what our guts already to us; principal write downs could have dire impacts on the future of housing finance and consumer access to credit.

Even bringing underwtaer homeowners to 100% LTV would cost banks $700 to $900 billion and FNMA and FREDDIE $150 billion.

Among the financial problems, principal write downs raise the issue of fairness since it essentially means homeowenrs making many sacrifices to pay their mortgages are subsidizing mortgages for those who don't.

The President is encouraging lenders to reduce LTV to 115% on HAMP modofications, but the market needs to find its own bottom.

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