But some important voices are raising questions about whether widespread principal reductions are the answer. When he was asked about that in a news briefing Friday, Assistant Treasury Secretary Michael Barr didn’t rule out broader use of principal reductions. But he suggested that there would be a risk that such a program would change a lot of borrowers’ behavior. “Most people, most of the time, make their mortgage payments …even if they’re underwater,” Mr. Barr noted. “You have to be quite careful not to design a program that induces more people to walk away” or one that strikes people as unfair. How would principal reductions induce more people to walk away? Let’s say your neighbor, who hasn’t made any payments on his loan for months, gets a huge reduction in his loan balance. Meanwhile, you’ve been working three jobs and dining on cat food to pay your note each month. Your reward from the bank? Zilch.
Is Slashing Mortgage Principal the Answer?
Most Popular Articles
Latest Articles
Why are existing home prices rising when sales are still so low?
Existing home sales fell in today’s report, but home prices are still up year over year, even with higher inventory and higher mortgage rates.