Diana, your analysis is all wrong.
This is a private sector solution to a business problem. Any “moral hazard” is creates is only a reaction to the moral hazard created by the lenders’ business practices in the first place.
For those for whom this truly represents a “reward” for being responsible, is there anything wrong with that? Many businesses reward their good customers. And it’s about dang time that responsible homeowners get looked at as partners in any potential recovery, rather than all the focus on deadbeats who are takers, not contributors, and who will default again and again no matter how much money is thrown at them.
Giving money to people who are responsible with their money, and who (even if irresponsible) still have enough money left in this economy to pay their mortgage, is truly stimulative. It’s the underwater homeowners who are paying who have the means, if their burden were only lightened a little, to carry the recovery to fruition.
If all the money thrown at those who truly cannot and will never be able to pay their mortgage had been funneled instead to these “responsible homeowners,” the cash would NOT have gone down the drain. They would have felt better, sooner, about their ability to come back from their housing value losses and this, at least, would have had some chance of stimulating/continuing consumer spending at non-Great Depression levels.
You are absolutely right, a complete buisness decision. Simple math by the bean counters of these mortgage insurance companies.
Like I said, its crazy times when its CHEAPER to do this than to run the risk of strategic defaults.
As far as trying to help people, they don’t care. The bottom line profit is what matters.... and rigtfully so.
Oh I also agree this is way better than taking taxpayer dollars and giving it to the people who were the most irresponsible in the first place!