Don't Be Afraid of the 'F' Word

By Kevin Spak,  Newser Staff
Posted Jan 31, 2009 10:07 AM CST
A sign of a house under foreclosure is shown in Antioch, Calif., Thursday, Aug. 14, 2008.   (AP Photo/Paul Sakuma)
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(Newser) – Foreclosures have gotten a bad rap lately, with politicians desperate to prevent them. But foreclosures actually represent one of the best paths to recovery, writes real-estate consultant Ramsey Su in the Wall Street Journal. The people facing foreclosure would be much better served walking away from the negative-equity McMansions destroying their balance sheets. Credit scores can be rebuilt.

Credit markets, meanwhile, will balk at any loan modification, thanks to what now looks like a flawed securitization model. Holders of junior tranches simply have no incentive to agree to a modification. Besides, “loan modification is not only ineffective, it is evil,” Su writes. “Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued…is predatory lending.”