The Times, echoing to some extent earlier criticisms of the Bush subprime mortgage plan (referred to here and here), published an editorial titled "Show Us the Mortgage Relief," in yesterday's edition and Paul Krugman's column, "Henry Paulson's Priorities," today. Here's an excerpt from the editorial:
The plan is too little, too late and too voluntary. Mr. Paulson and his boss, President Bush, have left it to the private sector — the mortgage industry — to protect the public interest, without any negative consequences if it does not. That is not the way the private sector works. And it is not how government is supposed to work at a time when Americans are facing mass foreclosures that threaten entire communities, financial markets and the wider economy.
Many mortgage servicers . . . fear being sued by mortgage investors. For some investors, letting a troubled borrower default would actually be better business, for others not. It all depends on how their particular security is set to pay out.
* * * [L]lenders that stick to the government-brokered guidelines have no guarantee that they cannot be sued.
And here's some of what Krugman (drawing on Elizabeth Warren of Harvard Law School and the Credit Slips blog, has to say:
[T]here’s a growing consensus among financial observers that the Paulson plan isn’t mainly intended to achieve real results. The point is, instead, to create the appearance of action, thereby undercutting political support for actual attempts to help families in trouble.
* * *
* * * Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house’s value — which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.
And what about people with good credit who were misled into bad mortgage deals, who should have been steered to loans with better terms? They get nothing: the Paulson plan specifically excludes borrowers with good credit scores.


