Foreclosure Plan Botched Up

John Geanokoplos,a Yale professor and partner at Ellington Capital Management,thinks we really botched the foreclosure relief plan.One of the remedies would have been to write down the principal.It takes a long time to evict people from their homes.During that time,the house gets partly destroyed and takes an awful lot of money to repair.We haven't seen the full effect of it yet.The mortgage servicers are keeping people in their houses longer and longer,collecting their fees.
Mortgage servicers can change or modify the mortgage.They have no interest in writing down mortgages,as they would lose their fees.They own second mortgages on the properties and want to keep the first loans.Most of the homeowners are subprime or Alt A.Together,their outstanding balance is 700 billion dollars.Almost all of them will end up being thrown out of their homes,Mr.Geanokoplos pointed out.