Letting 100,000 Homes Fall to Pieces

Merits of New Mortgage Aid Are Debated Critics Say Treasury Plan Won't Bring Long-Term Relief

By David Cho and Renae Merle Washington Post Staff Writers Tuesday, March 4, 2008; D01

The U.S. Treasury said yesterday that its mortgage-assistance initiative helped 45,000 distressed subprime homeowners get new loans in its first month, but a veteran mortgage banker who helps run the program said many of them may not receive long-term relief and could ultimately face higher total costs.

. . . But financial firms have been reluctant to offer generous loan modifications because they have to consider the returns of the investors who buy mortgages and provide the crucial financial backing for the loans, Longbrake said.

"A mortgage servicer's obligation is to get the maximum value to the investor over the life of the loan," he said. "If you are going to modify the loan and keep the borrower in the house, the bias is to do that for a shorter rather than longer period of time. . . . There's a reluctan…