Quote:
Originally Posted by ItalianFX
I was at my friend's cousin's 2 year birthday party and his other cousin (40) is big into investing. Another guy at the other end of the table (don't know who he was) was sitting there and they started talking about the mortgage crisis and government bailout.
The one guy proposed that a way to fix the crisis is like this:
Say someone bought a $500,000 home and got a loan for $400,000. Now the house went down in value to $350,000, so effectively the owners are in the hole $50,000. He proposed that the government use the $700b to buy out that $50,000, reappraise the house to $350,000, extend the mortgage to 40 or 50 years and lower the interest rate to 4.5%-5%.
And my friend's cousin said, "problem solved." It was a little bit over my head, but I guess they understood it.
What do you guys think?
The mortgage plan that I propose is a bit different. 96% of mortgages are currently being paid on time. Regardless of LTV no intervention is required here. Let the mortgagee continue to pay.
If a mortgage holder becomes delinquent to the extent that they can not make payments even after being provided one payment extension per year the lender should proceed with foreclosure proceedings.
The faster that troubled mortgages are foreclosed and liquidated, the sooner true price discovery can occur. Many prospective buyers have been waiting on the sidelines anticipating this very decline in housing prices. Once the bottoming in prices has been clearly established they will gladly purchase a home at its true market value.
