Is A Fed Bailout Of Bad Mortgages On The Way?

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Education & Training

It looks like the Feds are in the process of creating a company to buy unwanted assets of financial institutions.  The Feds have done this before; back in the 1930s they created the Home Owners Loan Corp to issue bonds to refinance people and the Resolution Trust Corp to sell off failed bank assets.

An article in CNNMoney states that if they were to create such a corporation it would buy unwatned mortgage backed security assets from financial institutions in an auction format.  Basically the company willing to sell at the lowest price to the new corporation would win the auction and rid themselves of the bad mortgages.

If this were to happen the new government corporation could then resell those assets back to the market when it wanted to.  They would also open options for those borrowers whose mortgage loans it does hold to refinance into a lower risk government insured mortgage, possibly an FHA Refinance.

What do you think about this?

Paul Dunn
Arizona FHA Mortgage Loans

Arizona USDA Rural Development Home Loans

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Tags:
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Rainmaker
530,850
Chris Brown- Florida Home Loan Specialist | Certified Mortgage Planner
Chris Brown | Certified Mortgage Planners - Orlando, FL
Chris Brown 407.367.2974

i think it is a mixed bag, but if there is a way that we can get out of this mess and keep our shirts [as a whole]  i think it should be on the table

 

chris the implementer

Sep 19, 2008 02:14 AM #1
Rainer
12,331
Dave Hamill
EXIT Realty Legacy - Prescott, AZ
Prescott, Arizona Real Estate

I think the government (that's us y'all) is broke, and I'm wondering where (other than simply printing it) they plan to get the money for more bail-outs.  Apart from that, the strong tendency for them to foul up most everything they touch concerns me more than a little. 

Sep 19, 2008 03:16 AM #2
Rainer
173,075
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Paul - I have mixed feelings but I think the new Resolution Trust-like program is about the best I have heard. We need something that gets the markets back on their feet. Is this it? Time will tell.

Sep 19, 2008 07:00 AM #3
Rainer
19,439
Travis Egan | 262.725.1505
Travis Egan -Movement Mortgage, NMLS # 655284 - Lake Geneva, WI
Movement Mortgage NMLS # 39179

I tend to agree with Dave.  The government has shown, to an almost certainty, their inability to correct issues of this degree.  Bureaucracy and red tape, this isn't the smallish government of the 1930's, this is a behemoth government who regularly pays hundreds of dollars for things like hammers and toilet seats.  Let the market correct itself.  If some big boys fail, then the market is efficiently dealing with the poor decisions of the leadership of those firms.  Ultimately, shareholders need to take back control of these firms and hold their collective leadership accountable.

Travis Egan

Sep 19, 2008 07:02 AM #4
Rainmaker
289,144
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

I'm torn on this whole mega-bailout strategy.  On one hand it seems the prudent thing to do, on the other...I wonder if the government is mortgaging the future on shaky terms. 

Regardless of what the powers-that-be do, we will find a way to live with whatever situation we get:  we're Americans - we always find a way to make things work (even if it feels like passing a kidney stone for a while).

Sep 19, 2008 03:50 PM #5
Anonymous
Ray

So what happens to the people who have mortgage problems? Do we, the tax payers, keep those people in their homes? what happens to their debt? how does that work? we pay their bills for them? Well as much as I am a proud American, who will help his fellow neighbor as much as I can...............I really am not sure how it is fair or right! Can anyone please explain HOW DOES IT WORK?

Sep 22, 2008 02:13 PM #6
Anonymous
Sean

The bailout need not be so complicated.  Here is a simplistic approach:

http://www.sentinel-consulting.com/Crisis/Simplified_Bailout_Strategy.pdf

 

Oct 01, 2008 05:23 AM #7
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Rainmaker
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