Underwater on land, and seaside

Yesterday’s Boston Globe had this article about mortgage lenders that are giving homeowners of underwater properties a break, thanks to pressure from the federal government’s Make Home Affordable program. Not every bureaucrat is on board with the idea. Edward DeMarco, a government official who is temporarily overseeing Fannie Mae and Freddie Mac, warned Congress of the moral hazard of forgiving mortgage debt, as if that would give homeowners an incentive go into default. This is ironic, to say the least, because the Wall Street geniuses that transformed mortgages from a safe commercial banking practice into a risky investment opportunity are guilty of moral hazard on a grand scale. The essence of this is the “Too Big to Fail” doctrine. Wall Street wins, Main Street loses. The Globe article says that tens of thousands of underwater homeowners could receive a reduction in the principal balance. That’s a token gesture at best, but it’s better than nothing.

In contrast to that article, yesterday’s paper had this ad for a property in Massachusetts that’s going up for auction. “Previously marketed at $12,500,000. NAME YOUR PRICE.” If you try to download the brochure you’ll be prompted to register, but a direct link to the PDF is here. I’d love to know what the story is behind this property. I assume that a fantastically rich person had a phenomenal fall.

All of the troubles that continue to plague the mortgage market are now academic to me. My mortgage was at a local savings bank, and that’s where it stayed until last week, when I made the final payment. Do I resent those who are getting a loan reduction? Nope. No more than I think gay couples getting married in Massachusetts are a threat to my marriage.