Politicians to the rescue?

Like it or not, some sort of borrower bail-out law is on the way. There is some good news about the recent Senate proposal in that the bankruptcy cram down provisions have been dropped. Also, the proposal to have FHA buy up mortgages at a reduced balance has been omitted. The rest of the law, however, will have a negative effect on the housing recovery. The law may help some homeowners stay in their houses, but doing this will prolong the declining values, and keep the banks very tight on credit. It was inevitable that a some sort of law was going to be passed, as it is an election year. Hopefully, this one won't do more harm than good.

I linked the LA Times version because it seems to be in favor of the bankruptcy "cram down" provision that would allow bankruptcy judges to alter interest rates and terms on exisiting mortgage debt. This is by far the most dangerous and careless idea that has been proposed. Allowing this to happen would undermine the entire financial system and bottleneck the courts with undeserving borrowers looking for a better rate on their mortgage.