Modification seems like a great idea now, but it may not help Wall Street or the economy in the long run.
Mortgage debt backs a lot of the bad bonds that are wreaking balance-sheet havoc, and mortgage relief has been suggested as a cure - both for homeowners and Wall Street. But a closer look suggests that modifying homeowners' loans may simply be pushing losses into the future.
Since the turmoil in the credit markets began a year ago, investment banks have had to write down the values of all sorts of securities, but the bonds that sparked the crisis were those backed by mortgages granted to borrowers who could ill afford the payments.
New foreclosure data due out Thursday should show even more homeowners underwater, so it's clear that mortgage debt is still toxic for investment banks, hedge funds and other institutional investors.
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