The Post reports on an effort to revitalize the Hope for Homeowners program. It notes that second mortgage holders have often objected to loan modifications because these modifications generally wiped them out. By contrast, it suggests that there is a need to "balance" the interests of holders of first and second mortgages. It would have been worth noting that holders of second mortgages are supposed to be wiped out. Under our sacred contract law, they are not supposed to get a penny unless the holder of the first mortgage is paid in full. Since first mortgage holders are losing much of the value of their mortgages, second mortgage holders should receive zero. That would be balance. However, second mortgage holders, which are primarily banks (a.k.a. the folks that the taxpayers bailed out) are using their legal power to block modifications to extort money from the government, even though their mortgages would be worthless in the event of a foreclosure. This point should have been made clear in this article.
--Dean Baker
