Just an idea: The gov’t is spending all this dough to bail out banks saddled with mortgage debt and mortgage related securities likely to go bad. Why not attack the route of the problem by having homeowners on the brink of foreclosure sell their homes at a loss then have the gov’t make up the difference from the potential foreclosure value? Pros: Banks would be dealing with only prepayment risk rather than default risk. Borrowers would be in the same financial position as foreclosing since they would be made whole by the gov’t, but their credit wouldn’t be destroyed since they sold rather than foreclosed. Cons:?
one thought home prices would drop even lower in the short term probably. suddenly lots of sellers (supply) while potential buyers would probably sit tight because of the market uncertainty. not to mention that this is just a blatant bailout of imprudent or irresponsible citizens by taxpayers that did the right thing
farney Wrote: ------------------------------------------------------- > one thought > > home prices would drop even lower in the short > term probably. suddenly lots of sellers (supply) > while potential buyers would probably sit tight > because of the market uncertainty. > I don’t see why there would be any more sellers since it would target people whose homes are about to go on the market anyway due to foreclosure. > not to mention that this is just a blatant bailout > of imprudent or irresponsible citizens by > taxpayers that did the right thing The same could be said for banks getting bailed out. These people wouldn’t be in a better financial position than if they foreclosed. Foreclosure is a long, ugly, value-destroying process that involves a lot of lawyers.
It ouwld be even better if the govt didn’t make them sell. I posted a plan like that awhile ago…
If they were made to sell, they could likely get into a more affordable house since their credit isn’t destroyed by a foreclosure, particularly now that values are down in many areas.
Joey is right, renegotiating the terms and getting the homeowners on some kind of stipulation plan would be best, and result in less loss for the banks, even if the govt didnt make the banks 100% whole.
- People in foreclosure may be in foreclosure because they don’t want to move. 2) The govt can’t be bailing people out who took out liar loans and bought overly-expensive houses. 3) Their credit deserves to get mushed 4) Agree completely about dead weight loss from lawyers
JoeyDVivre Wrote: ------------------------------------------------------- > 1) People in foreclosure may be in foreclosure > because they don’t want to move. True, but they will be booted out of their house anyway, though foreclosures usually take over a year to actually evict the borrower. > 2) The govt can’t be bailing people out who took > out liar loans and bought overly-expensive > houses. Instead they choose to bail out ivy leaguers at the white shoe firms who underwrote and securitized their mortgages to earn a bonus for that quarter? > 3) Their credit deserves to get mushed Probably true. But perpetuating an underclass by preventing these people to buy new homes again won’t do anything to help out the economy or home values. > 4) Agree completely about dead weight loss from > lawyers Word.