A group of state government regulators and attorneys general are whining that lenders aren't modifying their loan agreements fast enough for their liking and are resorting to threats.
"If loan mitigation and modification don't produce fruitful results for homeowners, I, for one, would be inclined to look at litigation possibilities to secure help for homeowners," said Iowa Attorney General Tom Miller.
He says that because the constitution prevents him from "impairing the Obligation of Contracts", so he'll do an end run and punish lenders that won't toe the line.
The group also has a lot of unsolicited advice on how lenders should be handling these delinquent loans, as if they know more about the subject than those who do this full time and have the most to lose if they do it wrong.
They don't realize or don't care that their intervention and threats will in the long run, do more harm than good and make the rest of us pay for the mistakes of others. If investors see that the government will arbitrarily pressure or intimidate them into modify these securities when things go south, then they'll either put their money elsewhere or demand higher interest as compensation for the additional risk. That punishes future borrowers and everyone else as money becomes less available for construction and real estate investment in general.
These homeowners never would have shared the profits with anyone if their timing had been better and they hadn't been so reckless. And I don't want to hear that they were pressured into these loans. They knew what they were signing and if they didn't then they shouldn't have borrowed the money in the first place. Or borrowed less.
What to do? Let the market take it's course and don't prolong the pain by propping up loans that deserve to fail. It's a mess, but fiddling around with private contract rights just prolongs and exacerbates the problem while eroding freedom.
Side Note: The article quotes someone from Acorn Housing Corp., a "nonprofit housing counselor." No, they're an affiliate of ACORN, a radical anti-capitalist group that has been implicated in numerous voter fraud scandals, among other things. The fifth column keeps rolling along, using journalists as willing dupes.
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