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Dissing and Praising the Recent Housing Bill

This bill gives investors a floor... so their losses may be lower if they participate in this bill, as opposed to selling their assets...

which allows them to offer principal forgiveness without the "moral hazard" of actually doing writedowns on existing loans.

The old argument was that if they did a writedown for you, then they'd have to do it for your neighbor.

Now they can tell the neighbor, "Hey, we CAN'T do one for you... because you don't qualify for this "special" program.

Also, many of the servicing agreeements don't have provision to write down principal, because it's such a foreign concept.