This is written in response to Rescue Bill - may be a GREAT thing! by Randall Schrader
Yes You are Dreaming!
Think about what you just said... You want the government to set up a division, on tax dollars, to invest in real estate? So for example... if they buy this 100k note from an investor for 80k, they then restructure the note so that the homeowner only has to pay 80k? Why wouldn't the investor do that to begin with?
In any scenario, this is a bad thing. The only thing that the government can do that the investor wouldn't, is write off their losses onto the backs of the taxpayers!
If this does go through, it will be great! No honestly! There are many investors out there that will love the opportunity to sell out a note to the government so that they can cut their 'losses'. The investors/banks out there have the capacity to restructure their notes if they would like. What a big mess this will be for the government, and the tax payers, when the note payer defaults on them! I thought Walmart entering into the real estate world was bad, but nothing would top this. It would be a money pit for tax money.
And... who is going to do this for the government? Anyone who can understand this would be out there buying up these discounted notes themselves (or at least the ones the have the chance of performing in the future) and make their own profits. The government will have schlups working for them who will be buying up all these notes and then writing them into the loss column!
How about the massive fraud issue this will open up? If the government has a policy to buy notes at 70% on the dollar, then what will prevent investors from inflating these notes? Do you really think that the government will due real due diligence to find value?
There are so many bad things to say about how this would affect us if the government did it. But then again... I will definitely take a good long look at investing in loans.... Why not, the government will back me up!
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