Modified Mortgages May Do More Harm Than Good

Critics say they hurt homeowners by merely delaying foreclosure
By Caroline Miller,  Newser Staff
Posted Jan 2, 2010 7:19 AM CST
In this Feb. 23, 2009 file photo, a home is seen in San Antonio, facing imminent foreclosure without assistance.    (AP Photo/Eric Gay, file)
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(Newser) – The Obama program to rescue homeowners by modifying their mortgages comes under fire in the New York Times, where real estate experts say it has actually hurt rather than helped delinquent borrowers and impeded the country's economic recovery. Critics say that by raising false hopes in those who can't afford their homes and delaying foreclosure, it has wasted money they could have spent moving into cheaper rentals and tarnished their credit records.

It has also lengthened the financial crisis by postponing the inevitable reckoning at banks, which need to tally their losses and move on. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway,” a hedge-fund mortgage expert tells the Times.

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