wiegie Posted March 6, 2009 Share Posted March 6, 2009 Muck, the more I think about it, the more I realize that this proposal is a HUGH give-away to the financial sector and holders of mortgage backed securities, etc. For example: Step Three – Deal with the other 10% of mortgage borrowers that are seriously delinquent on the mortgage loans. As a first step, determine what they can pay based on cash flow affordability tests and then proceed with loan modifications. All delinquent borrowers could go to any FDIC regulated institution regardless of where the original loan was originated. The individual banks would determine the amount of principal reduction and the U.S. government would fund the value of the principal reduction with cash, allowing the original mortgage balance to prepay. In other words, the government is going to buy toxic assets at their face value. Stupid lenders win, stupid home-buyers win, tax-payers lose HUGH. Count me out. Quote Link to comment Share on other sites More sharing options...
muck Posted March 6, 2009 Author Share Posted March 6, 2009 Muck, the more I think about it, the more I realize that this proposal is a HUGH give-away to the financial sector and holders of mortgage backed securities, etc. For example: In other words, the government is going to buy toxic assets at their face value. Stupid lenders win, stupid home-buyers win, tax-payers lose HUGH. Count me out. Compare: 10% of homeowners = $900 billion of mortgages 33% average underwater (a number pulled out of my butt) = $300 billion initial cost to the taxpayer $300 billion 'equity strips' sold to investors around the world for (say) $50 billion = $250 billion terminal cost to the taxpayer ....versus... whatever it is that is going on now Bottom line: This solution is 'cheaper' and faster, goes to the heart of the problem, is easy to understand, does not involve a whole new layer of government intrusion / socialism, etc. I still like this approach more than anything else I've heard by a mile. Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 6, 2009 Share Posted March 6, 2009 Compare:10% of homeowners = $900 billion of mortgages 33% average underwater (a number pulled out of my butt) = $300 billion initial cost to the taxpayer $300 billion 'equity strips' sold to investors around the world for (say) $50 billion = $250 billion terminal cost to the taxpayer ....versus... whatever it is that is going on now Bottom line: This solution is 'cheaper' and faster, goes to the heart of the problem, is easy to understand, does not involve a whole new layer of government intrusion / socialism, etc. I still like this approach more than anything else I've heard by a mile. I'm not sure it fixes the problem because so many of the toxic assets out there are based upon mortgages that have already gone belly-up, so even refinancing the current bad mortgages still likely won't be enough. Quote Link to comment Share on other sites More sharing options...
muck Posted March 6, 2009 Author Share Posted March 6, 2009 I'm not sure it fixes the problem because so many of the toxic assets out there are based upon mortgages that have already gone belly-up, so even refinancing the current bad mortgages still likely won't be enough. Weeg...even if the only thing that happened was refinancing all of the performing mortgages at a lower interest rate, the system would be ENORMOUSLY better off...and THAT costs nothing to the taxpayer... Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 6, 2009 Share Posted March 6, 2009 Weeg...even if the only thing that happened was refinancing all of the performing mortgages at a lower interest rate, the system would be ENORMOUSLY better off...and THAT costs nothing to the taxpayer... that is not true--according to your proposal, the government is going to pay off the difference between the old mortgages and the new mortgages. Quote Link to comment Share on other sites More sharing options...
muck Posted March 6, 2009 Author Share Posted March 6, 2009 that is not true--according to your proposal, the government is going to pay off the difference between the old mortgages and the new mortgages. The proposal above has several steps. The first step is refinancing the performing mortgages on owner-occupied, primary residences. If that is the only step of the above proposal that is implemented, the system is still WAY better off. Quote Link to comment Share on other sites More sharing options...
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