The bailout bonanza keeps on rolling, and yesterday's foreclosure relief plan was trotted out under the guise of helping millions of underwater homeowners nationwide. But upon closer analysis, the plan will only benefit a very small percentage of Floridians. The plan is full of incentives for loan modifications but principal reductions don't factor into the bailout equation. According to the Wall Street Journal, "Some analysts say the administration isn't doing enough to encourage lenders to write down loan balances instead of just reducing monthly payments. Recent studies by Credit Suisse and others suggest borrowers are less likely to fall behind again on their mortgages if both their principal and interest payments are reduced." South Florida mortgage banker Louis Spagnuolo likens this package to TARP 1 and TARP 2, "Three or four months down the road, they're going to see this doesn't solve the problem, and then we're going to have stimulus package No. 2." Investment bank UBS summed up Wall Street's reaction to the plan with this headline, "Obama Speaks. Market Listens. Sells Off."
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