You see this issue extends to the greater moral hazard that is not only being ignored by the government, but so far by courts. I cannot believe we will not see cases cropping up soon.
Seriously what will happen when thousands, or shall I say tens of thousands of people receive such treatment. Maybe even hundreds of thousands? Who makes the choice? Who makes the rules? When the first lawsuits come, and they will… how will courts rule? Because if courts side with the first plaintiffs that get pissed of because the neighbor next door received a rework and principal reduction while he did not then it seems to me the entire bailout will be jeopardized.
I have already seen a few situations of interest rate reworks but no principal reductions yet.
However it is arguable that even these sort of reworks create a potential source for litigation don’t they?
