fixed income investor

John Berry: Homebuying Binge on East Coast, Too

Mr. Berry's article was excellent. One of his most important points was that each loan is an individual contract with unique borrower and lender motivations. It is naive to think that a govt sponsored one-size-fits all fix will be effective.

My understanding of the market and the foreclosure process:

The foreclosure process is driven by the lender, excercising their contractual rights in response to a borrower's failure to perform.

In many cases servicers have the ability to modify loans where it is in the best interest of the lender / investor. Perhaps they choose not to because it does not serve the lender's interest. Why would we second guess this choice? Are we comfortable negating or delaying the enforcement of contracts? Why? because it's someone else's property/collateral?

Mortgage lending is unique insofar as many rights are bestowed to homeowner/borrowers that do not exist in other lending arrangements. This includes a protracted time period to redeem the outstanding balance after non-payment. The lender's ultimate defense is the right to take possession of the collateral and foreclose after the time period expires. Why do we wish to deny them this leverage?

I do not see how any investor will regain confidence in lending if govt tries to drive the market in some populist direction or limit the contractual rights of lenders.