What's the quickest way to assure that lenders will never ever buy another asset based on mortgage income streams? Make it clear that, at any time, the income stream of that mortgage could be modified by a regulator, a judge or the like. How would you value that asset now?
Still, foreclosure assistance puts a smile on the face of lots of voters. So, I suppose you had to expect they were going to push it. Especially this year. FDIC's wiley Sheila Bair has an idea though.
"Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards," she said. "By doing so, unaffordable loans could be converted into loans that are sustainable over the long term."
If its going to work, it will have to be voluntary for the security holders, and a government guarantee goes a long way for that.
FDIC's Bair Suggests Guarantees for Loans [The Wall Street Journal]