What policy can – and I am hopeful will – achieve is that the adjustment will, not least by rolling back unaffordable excesses, be accomplished in a manner that is much less damaging to the economy and society.
Finally, PSAs should clarify the situations in which loan modifications and other mitigation strategies should be pursued. One tool that could aid in providing such clarity, and has received substantial attention over the last few years, is the net present value model. Requiring servicers to take mitigative actions that are net-presentvalue positive to the investor could encourage the fair and consistent treatment of borrowers.