Good news? For some.
Some underwater homeowners will probably find some relief. But the private company, Mortgage Resolution Partners, with whom the city of Richmond California is working, just got a huge piece of business and will benefit nicely. In California (really everywhere) it’s good to have friends on the City Council.
No one wants to see people underwater on their houses. No one wants to see people losing their homes. However, the homeowners agreed to the mortgage. No one forced them to sign the contracts. They made a mistake, a big one, and one that was encouraged by banks and municipalities, but only grown-ups get to sign on the dotted line.
The much bigger issue here of course is that the housing bubble was created by the Federal Reserve holding interest rates down for too long primarily, and an activist government which deified The Community Reinvestment Act on top of the idiotic monetary policy. The CRA poured people into the real estate market who had no business in it. The realtors were happy, the banks were happy, the voters were happy, and the politicians were happy, for a while. Then, as it always does, the easy money hangover came on with a vengeance.
One other important point is that after any bulk refi, after MRP gets its fees, some people will still not be able to make ends meet. The responsibility for a defaulting mortgage which used to be the bank’s, is now – it appears – the responsibility of the taxpayers.