$20 Billion “Get Out of Jail Free” Settlement Floated « naked capitalism

The servicers, as well as Fannie and Freddie, would be required to provide principal mods. But given the meager settlement amount, this is a complete and utter joke. The mods will be too shallow and too few in number to help either borrowers or the housing market. Both J.C. Flowers and Wilbur Ross, both very tough minded investors, have found deep principal mods work, and research supports their views. Why are borrowers going to struggle to make home payments when they still face a loss and/or a big tax bill when they try to sell the home? If you assume a combined first and second mortgage balance of $200,000 and a mod of 10%, or $20,000, which is too low to make much difference to borrowers and well short of what investors would accept (given 70%+ expected losses on a foreclosure, 25% to even 50% is a no brainer), you only get 100,000 mods. Mortgage Fraud Whitewash: $20 Billion “Get Out of Jail Free” Settlement Floated « naked capitalism: "If you assume a combined first and second mortgage balance of $200,000 and a mod of 10%, or $20,000, which is too low to make much difference to borrowers and well short of what investors would accept (given 70%+ expected losses on a foreclosure, 25% to even 50% is a no brainer), you only get 100,000 mods" Make big money in penny stocks today