zingo

Alt-A Loans Spiraling Downward

The solution to principal writedown to prevent default is very simple. For example on a house once valued at $500k now worth $400k with a $470k mortgage you simply rework the loan into 2 loans, a loan of $400k with better terms and a second loan of $70k with 0% interest due on transfer. This way the irresponsible borrower does not get scott free and although the bank loses interest on the $70k they may some day get it back.