To bail or ... to bail

User Forum Topic
Submitted by ironman on July 23, 2008 - 3:04pm

I am growing very pessimistic about the possibility of fair housing market correction. What I mean by fair is the people who ate and drank the most should pay the biggest chunk of the bill. And yes, I know the bad waiter tricked them into ordering that Costco size tiramisu, and although they enjoyed it for a while, they got stomach aches, and they should not be paying for it since it was a bad decision.

There are two choices to bail or to bail. Once owners decide to dump the house on which they owe much more than another one is selling on the same street, there are two choices: 1) direct government bailout – the government reduce the remaining mortgage in order to persuade them to stay (probably will happen through FNM cash infusion to buy or re-write bad loans or Dodd’s cash handout) 2) indirect government bailout- owners walk away and bank pass the loss to the government.

Either way the money/equity is gone and if owners don’t make good, banks won’t; there is nobody to collect from (including people that benefited) so the loss will be socialized (collect from everybody equally)

Now based on the assumption that bailout is inevitable, one way or another, which bailout scenario would you say is most attractive?

Ironman

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The bailout is more
Submitted by contraman on July 23, 2008 - 9:02pm.

The bailout is more attractive and makes more sense because it is not a "bailout". The government takes on new loans at 85% of the current market value and also participates in any appreciation of the property over 5 years. The banks take the hit on the reduction not the taxpayers....

We are on board with 20 banks now to do principal reduction loans...

www.shortrefime.com

Contaman, if it wouldnt have
Submitted by DWCAP on July 23, 2008 - 9:23pm.

Contaman, if it wouldnt have happened without the express written support and encouragment of the federal governmnet and the Federal Reserve, then it would be a bailout. If it only happens becuase the gov will take on shitly loan assuming the banks take a hit first, it is still a bail out. The tax payer is still on the hook for all this, even if the loans are less likely to implode. That is what makes it a bailout, you wouldnt be able to do it yourself (read, banks couldnt do it themselves.)

In places like Detroit, where values in many areas are already in the dumps, and the hope is to save neighborhoods, I will begrudgingly deal. Kinda like an extra school bond, I hate it because I understand how much money is waisted, but what are you gonna do? Make kids hurt because we cant rein in our unions?
In SD, SoCal, NorCal, FL, NV, AZ, or other select areas..... Bite me. But a bailout is still a bailout, even if it isnt necessary a bad thing the country over.