Friday, January 08, 2010

The Government is Finally Letting Second Mortgages Die

It was a bad idea from the very beginning but it seems that the government is just going to let these things go into default and not try to bail them out anymore.

These arguments are getting less traction as time goes by. The destination media have lately begun taking an interest in HAMP's counterproductive results. The HAMP's underwhelming numbers, ineffectiveness, and costly efforts to limit redefaults (which have met with limited success) have been well documented. And the public, which never even wanted to bail out responsible homeowners, can't get excited about saving somebody's cigarette-boat-financing HELOC. If the Treasury Department is looking at that grim battlefield and putting up a white flag, that's the better part of valor.

This might be another shoe to drop for smaller lenders who might have to write off even more HELOCs. Perhaps the Fed is finally understanding that some people should just not be bailed out especially if they refinance for like $200 less a month and then lose their jobs and end up defaulting anyway. Maybe sometimes people just need to lose their houses and end up just renting instead.

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