Bailout Won't Stop Foreclosures that Push Down Everyone's Property Values (CRL)

Bailout Won't Stop Foreclosures that Push Down Everyone's Property Values, Center for Responsible Lending Says

DURHAM, N.C., Sept 21, 2008 /PRNewswire via COMTEX/ ...

-- The government plan announced by Treasury Secretary Paulson and Fed Chairman Bernanke fails to deal with the root cause of the crisis -- families in foreclosure -- and instead is purely and simply a bailout of the lenders who created this disaster. The bailout will not solve our economic problems because it will do virtually nothing to stop the foreclosure epidemic. Continuing foreclosures will drag down the economy even further.

-- A truly comprehensive plan must also benefit ordinary, hard-working Americans, the ones who already are bearing the brunt of Wall Street's excesses. If it doesn't, then any new plan is more of the same -- only with more taxpayer money at stake.

-- By forcing taxpayers to buy abusive and reckless loans from irresponsible lenders, taxpayers are funding a multi-billion dollar subsidy to private corporations. Yet the millions of families who have been unfairly pushed to the financial brink by these mortgages get nothing. Only by preventing the 6.5 million foreclosures expected in the next few years -- and the $356 billion drop in surrounding property values that will result for an additional 46 million families -- will the economy begin to recover.

-- Don't let anyone tell you the government will be able to prevent foreclosures by buying this troubled debt. Wrong. Mortgages of questionable value have been sold into highly-complex securities, which have been carved up and sold to thousands of investors around the world. The government can't put these Humpty Dumpty slices back together again because it won't own or even control them all. Bailing out financial institutions is NOT the same thing as providing relief to foreclosure-plagued American families ... <more>

http://www.marketwatch.com/news/story/bailout-wont-stop-foreclosures-push/story.aspx?guid=%7B3BC67FE8-5D21-463A-90B4-2B8373F0EFF1%7D&dist=hppr

Buy the real estate bubble! Only $700 billion! Where else could you buy a bubble for $700 billion?

housing prices are disconnected from salaries - salaries of median $50,000 only support a house of 150,000 which is 2 1/2 times income - that was the measure for years

Its not only a money grab but its a land grab also. I might be wrong but I dont think the taxpayer will go along with this so called bailout'

even lower in some regions. Pricing in most bubble areas reflect nothing but phantom equity. Keep in mind, rampant fraud & non-existent regulation/lax lending pushed prices to the stratosphere.

With banks now unwilling to lend, scrutinizing even very qualified buyers (20% down, verified income, high fico), there are no buyers to support current prices.

Down housing prices go. We've been here before. Look at the late '80s housing bubble. That housing bubble went bust is '89. It took at least 7 years to reach the so-called "bottom". Lots of homeowners lost their asses back then.

Now, compare the late '80s bubble this current bubble:



The "juicing" of the current bubble was by design, artificially propping up an economy that had long been fundamentally broken.

I don't see why all the holders of them can't just get together and all decide to cross-cancel them out. Swap them. Because they DO cancel each other out you know.

Whatever's left, they could settle that up because it wouldn't be much.

This is a fictional asset. There isn't enough money in the entire world to clear it. Why should WE do it? All the worlds' bankers played this game, all the holders of this paper by definition bought into it... let them work it out.

They could open themselves a little "derivatives swapping window" on Wall Street. I think that would be highly appropriate.

Meanwhile if our government doesn't commit all of our future credit on this, it could start an RFC model bank and lend to our own citizens (only), and get this thing going the right way.

We could BUY and OWN the actual mortgage debt (which this plan doesn't give us btw), and refinance it right, bundle it whole as it used to be done, and investors (probably our own people) would know what it was worth, and that it had government back-up. Confidence.

If we don't stop the foreclosures, obviously there will be no stopping the drop in prices. As more people are foreclosed, more people are pushed into foreclosure, it's a downward spiral which eventually will suck everyone under. The banks don't want to lend now b/c a market bottom hasn't been reached yet, but THEY, by foreclosing, are continuing the decline. They aren't refinancing either, or doing workouts. And we have no assurance loans will be made even after we give up this bailout.

They're just being the problem as before. Nothing about their attitude or actions has changed.

They're pretty much useless. And very expensive at that.

I don't know about anybody else, but it was pretty clear to me that the banking lobbyists wrote the Paulson plan. It reads just like their agenda, and so were his remarks. All for them, nothing for anybody else. They opposed allowing mortgage modifications in bankruptcy last spring, in almost identical language. (And it was Phil Gramm, as lobbyist for UBS btw.)