Financial regulators moved to widen the range of delinquent loans eligible for purchase by the New Leap Fund on the view that borrowers who tried to repay should not be penalized under policy support programs. But the financial industry has voiced considerable concern as the scope of debt forgiveness keeps expanding. Giving a fresh start to vulnerable borrowers who lost their ability to repay and fell into default is necessary, industry officials say, but repeated government-led restructuring programs risk spreading the perception that holding out will get debts written down, undermining credit discipline.
The New Leap Fund plans to revise its agreement with financial companies and related institutions to include delinquent loans with a…