Florida Attorney General Pam Bondi is working with many other attorneys general to help address wrongdoings of loan servicers in the context of the Mortgage Foreclosure Multistate Group. But she is not in favor of banksters reducing the mortgage principal of homeowners, as she believes that this oversteps the mission of the group that is negotiating with the five banks, and fears it could turn into a free-for-all of underwater homeowners.
Pushing lenders to forgive part of their mortgage holders’ debt could encourage even responsible homeowners to stop making payments on their loans, in the hope they can eventually get their bank to erase part of their mortgage, Bondi wrote in a recent letter to the head of the working group.
“Some homeowners may simply default on their loan and use the States’ agreement to obtain a principal reduction — whether or not they actually made an effort to maintain their mortgage,” wrote Bondi, who serves on the negotiating group’s executive board.
She called it a potential “moral hazard” that “rewards those who simply choose not to pay their mortgage — because they can simply take advantage of lenders‘ obligation to honor virtually automatic principal write-downs.”
