Home loan help plans have naysayers
The government is working with financial institutions to renegotiate home loans in order to help homeowners. But hedge funds think the plans are a terrible idea. Alisa Roth looks into why.
Signs at Fannie Mae, Freddie Mac buildings (Getty Images / Marketplace)
More on Housing - Real Estate, America's Financial Crisis
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.
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