So, having attended the Connect Realty workshop regarding "the mess"...I am now on a mission.

The real fix...drum roll please....  

IS FOR BUYERS TO BUY HOMES!!!!  Using any and ALL of the programs out there.  USDA, First Time homebuyer programs, FHA, and a few strong banks still making loans.  The credit has soften up...not like it was..and it will never be there again!  Tax credits...etc.... This is the only long term fix to the problem...so we as  Realtors can get this through to our buyers; and help fix the problem!!!  

How does this fix the problem:
Mortgage interest is what fuels our economy/stock market.  The interest earned on these loans is what goes into the banks so they can make more loans and what securities base their "profit/cash" on.  When a loan is in default the lender is required to have $700,000 CASH on hand for every $100,000 of the mortgage in default. So when, for instance WAMU..started getting loans in default, they no longer had enough cash on hand (FDIC regulations) and were deemed insolvent.  Meaning, that they no longer had enough cash on hand to pay out IF they collapsed and had to pay cash to their account holders. (CDs, Savings...etc) So the FDIC comes in  and  says...sell the company, or pay out your account holders and close the doors. It also means that they cannot generate new loans..car loans...anything....  

Now, as you know mortgages are sold to investors. So if the mortgage is for $100,000.  An investor will buy it for $105,000. (Expecting to recoup the $5000 in the interest payments.  Then...these investors have a bundle of mortgages earning interest...which funds retirement accounts, insurance companies...etc (I am soooo simplifying this!)  When the mortgages are in default OR the value of the house has fallen below the loan amount...then they have bad paper....no money.  Insurance companies take our premiums and invest into Mortgage Backed Securities...well, when the value of those securities falls...they have less cash...which means less money to pay out on claims.  Same principal applies to retirement accounts.  

The bail out is to regroup, consolidate (to the top 5 banks!) and buy up bad paper.  It is a band aid.  It will help some folks faced with devalued homes, slow some foreclosures....but it is a band aid. 

Go target the renters, investors and baby boomers....bring peace to our nation! lol 
Also, did you know that first time home buyer...just means you haven't owned a home in 3 years ?