Help power Marketplace this winter when you support the show today. Donate Now!
Fallout: The Financial Crisis

Home loan help plans have naysayers

Alisa Roth Nov 12, 2008
HTML EMBED:
COPY
Fallout: The Financial Crisis

Home loan help plans have naysayers

Alisa Roth Nov 12, 2008
HTML EMBED:
COPY

TEXT OF STORY

Scott Jagow: Yesterday, Citibank said it would take steps to keep people out of foreclosure. And the government said it would speed up the renegotiating of loans under Fannie Mae and Freddie Mac. This idea of helping homeowners who took on mortgages they now can’t afford . . . not everyone likes that. Alisa Roth reports.


Alisa Roth: Nobody seems to know how many homeowners would benefit from these or similar plans. But hedge funds, for one, think they’re a terrible idea.

Back in the day, hedge funds bought up a lot of these mortgages as securities. And the way the economy’s going these days means they’re losing money left and right.

Susan Wachter: This heightens that pressure, because they will find payments coming in at a lower rate than they contracted for.

Susan Wachter is a real estate professor at the Wharton School. And she says some politicians are worried the plans reward risky behavior.

Susan Wachter: What message are we sending going forward in terms of the mistakes people have made in terms of entering into these mortgages? And clearly mistakes have been made.

Wachter thinks the real point is that nobody thinks modifying loans is a brilliant idea — it’s just that the consequences of not modifying them would be so damaging.

In New York, I’m Alisa Roth for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.