I would honestly rather see my home's value go down than see the guy next door (figurative: my neighbors are lovely and fiscally responsible) who made a poor/negligent financial decision get a mulligan at my expense. Anyone who's ever read this blog before knows where I stand. Write down refers to a situation where the company is unable to repay the debt. The arguments are plain and simple: Bite the bullet to save the greater housing market or don't because the moral hazard is far too untenable. It would also help borrowers who don't qualify for modifications because they are so far "underwater" on their mortgages. For example, servicers could accept a principal writedown by an amount at least sufficient to allow the borrower to refinance into a new loan from another source. The idea is to give folks equity back in their homes so they don't walk away from their mortgage commitments. A Principal Write-down may occur on one or more occasions and accordingly the Capital Securities may be Written Down on one or more occasions (provided, however. So now I'm beginning to hear more chatter about principal writedown, and more specifically, government-funded principal writedown. A writedown that is sufficient to make borrowers eligible for a new loan would remove the downside risk to investors of additional writedowns or a re-default. Olick points out that the decline in home sales was expected - "home sales were spiked by several shots of government stimulus in the second half of 2009, and as that stimulus starts to wear off, sales activity has nowhere to go but down." With the homebuyer's credit expiring just as the 2010 season gets rolling in April, and Bernanke making noise about raising interest rates, she suggests that home buyers are likely to think twice before leaping into the market.īut Olick is most concerned about the potential for principle writedown: "Most agree that the government's mortgage bailout program (Home Affordable Modification Program or HAMP) is at best unsuccessful and at worst detrimental. For example, servicers could accept a principal writedown by an amount at least sufficient to allow the borrower to refinance into a new loan from another source. Principal Writedowns on Loan Modifications from Diana Olick Third, it seems odd that the settlement doesn’t call for JPMorgan Chase to stop foreclosure actions that may be already underway.
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