When is a housing crisis like venereal disease?
If you’re among those upset that your taxpayer dollars may be spent in volume to rescue people who — for whatever reason — can’t make their mortgage payments, Federal Financial Analytics analyst Karen Shaw Petrou recommends thinking about it this way:
“Preventing foreclosures has a lot in common with treating syphilis. In both cases, you help some who are undeserving, but – in an economic collapse or a public-health emergency – one acts nonetheless. ”
Just as in an serious epidemic, you’d take care of the problem and leave moral judgements to others, the right course of action is to take action to halt the housing crisis and leave the debate about moral hazard to economists, she wrote in a note to clients on Friday.
Yes, it’s possible that under President Obama’s plan to prevent mortgage foreclosures, some borrowers who could make their current payments may score a “quickie refi” at potential taxpayer risk, Petrou says. Others may abuse a provision that allows judges to reduce the amount of principal on some loans, she adds.
But give the Obama plan credit for trying to be fair by trying to weed out the the undeserving by limiting relief in certain ways, Petrou writes.
And in any case, the current crisis is the “the financial equivalent of a mortal epidemic,” she says.
Plenty of time to lecture about practicing safe credit later.