Citigroup and Democrats have come to an agreement that would allow Bankruptcy judges to rewrite the terms of Mortgages. This would undoubtedly allow people to avoid being foreclosed on.
What is the benefit? Is there any?
The only benefit is that people who bought a house and could not afford it will now be allowed to keep it. That is the only benefit.
The drawbacks are huge! Banks and investors that hold these mortgages will be losing money. When banks and Investors lose money, they don't really. It will drive up the interest rates on us who pay our bills to offset the losses. It will also tighten the lending market. It will be much harder to get loans unless the bank is close to 100% sure you can pay for it.
Sounds like a great move to get the economy back on track. Where does Obama Stand on this one?
It is also worthwhile to note, this is not law yet. It is only Citi agreeing to it, but there has not been a law passed forcing this to happen. Not a real good business move, but what the hell, we just gave them a big bailout of our money.
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