Not that Simple

I came across this brief article this morning and thought it was worth sharing:

Reworking Troubled Mortgages Isn't That Simple

In order to rework troubled mortgage, the government may have to do more
than persuade lenders and investors that workouts are ultimately more profitable
than foreclosure, analysts conclude.

Hundreds of investors hold an interest in trusts that invest in mortgages.
If loans are reworked, some of those investors will lose money. Mortgage
servicers are prohibited from modifying a pool of loans without getting the OK
from two-thirds of the investors. That nod can be difficult to get because some
investors stand to make more from foreclosure.

Many observers and government officials are pointing out that it will take
government action to nullify or supersede investor interests. If the government
stepped in and, perhaps, gave less-favorable tax status to an investor that
didn’t agree to accept a modification, there would certainly be lots of
litigation and the government might have to reimburse investors for value they
lost, analysts say.

Therefore, some analysts conclude that the best answer is to give
bankruptcy judges the right to cut the interest rate or reduce the principal
owed on a debtor’s troubled mortgage.

Source: www.realtor.org

It never ceases to amaze me how large and diverse our economy is. The fact that the government has allocated $750 billion to work on the credit crisis is not enough, we can’t just buy or way out of this mess. There has to be a well developed and thoughtful plan created by a broad cross section of business and political leaders and I only see a shoot from the hip approach.