Who should be responsible for helping homeowners who default on their mortgages?

By PBN Staff
Posted 2/26/09

The last two years have been a very painful reckoning for individuals and financial institutions that engaged in risky behavior.

The individuals signed for loans that in many cases they could not afford on the assumption that rising real estate prices would allow them to re-finance the loans and they could flip themselves into a strong financial position.

The banks and brokers making loans granted them to people who provided no tangible evidence that they could re-pay the loans, all on the assumption that they could sell the loans into the capital markets and pocket the transaction fees without having to deal with the likely defaults.

Unfortunately, the way out of this massive Ponzi scheme requires either a continuing wave of foreclosures, which threaten to undo both banks and homeowners (whether or not they are directly involved in the collapse of the housing market), or modification of the loans, with banks, homeowners and taxpayers suffering.

Where do you stand on this issue?

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