Saturday, January 10, 2009

Cardoza foreclosure plan

Rep. Cardoza's foreclosure plan is described in this Record article.

What I like:

In contrast to earlier plans by the FDIC, Treasury, most modifications done currently by lenders, and proposals to allow bankruptcy judges "cramdown" principal, Cardoza's plan is not limited to those who are currently defaulting, in bankruptcy, etc. This is much more fair. We should not be encouraging and rewarding people for defaulting, and we should do something for people who have continued to live up to their mortgage obligations even when it is challenging and sometimes not in their own best financial interest.

What I don't like:

It doesn't involve principal reduction, thus I think it will only postpone rather than prevent most foreclosures. In fairness to Cardoza, I'm sure he recognizes the benefits of principal reduction too, and part of the focus on refinancing interest rates is probably practical. An effective principal reduction program has tougher implementation and legal obstacles to overcome.

I don't like legislating interest rates on mortgages. This is a housing subsidy that will be very hard to take away once it is in place.

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