This has nothing to do with communism or government bailout (no tax money needs to be involved here). It is more of a “mutual defense pact”. The lenders and the investors all recognize that it is far cheaper to keep the borrowers who are solvent in the house than foreclosing on them. Then at least someone will take care of the property, pay the property tax, amortize the loan principal and not add further pressure to price of foreclosed properties etc. However they also know that acting individually, they are better off to be the first to foreclose as home prices are currently on a downward slope. That is why they need a collective pact to promise to take the same sacrifices. Now knowing human nature this is also what makes one wonder if the deal can stick in the long term. There is incentive for people to break the pact and profit from others’ actions and I don’t see how they can enforce such a pact legally.
