Washington Post Calls Mortgage Principal Write-Downs a Bad Idea
The Washington Post recently ran an editorial discussing the Obama administration’s Home Affordable Modification Program (HAMP), and addressed the idea of principal write downs. The editorial states “HAMP’s problems have prompted calls for even more drastic modifications, including mandatory write-downs of loan principal. Bad idea. Slashing principal, presumably at taxpayer expense, might help some borrowers but comes with no guarantee that they won’t end up defaulting anyway. What it would guarantee is moral hazard — other homeowners would demand the same break — and a stampede of private capital out of mortgage finance.” The complete editorial can be accessed here.