Principal-Cut is not attractive, yet

As I wrote in my last post about the housing-market legislation pushed by Rep. Barney Frank, the deal is not yet attractive to the mortgage firms. Today the WSJ says just that.

Mortgage companies are more likely to participate in the write-down program if they expect home prices to continue to decline steeply, he notes, increasing the chances of larger losses.

These firms have a variety of options and will evaluate the risk return on each before agreeing to the congressional plan. The risk however is if there are any loopholes in the plan that will allow the mortgage firms to selectively agree to high risk mortgages.