WASHINGTON (Reuters) - Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said on Monday.
"The results, I confess, were somewhat surprising, and not in a good way," said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum.
What's surprising is that this government hack is surprised. These are people who never should have had mortgages in the first place but did because the government put a gun to lenders heads. Re-financing these loans just encourages more of the same irresponsible behavior.
These new loans have a default rate of 36%, which is around nine times the average for all mortgages. So the government has just further injured the economy by strong arming banks to again throw good money after bad.
This is the moral hazard that always dooms government-run economies to failure.
No comments:
Post a Comment