I think your plan is excellent (much like what I proposed in the “call your representative” thread). 😉
The only thing I would disagree with is the loans for new mortgages. The govt should not be in the mortgage business, as it will continue to distort prices. Besides that, many of the current homes on the market will still lose over 30%, and the 10% down will lead us to the same problems we have today, except the govt is directly on the hook.
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Look, I don’t like the idea of the govt. being in the mortgage business either. I think the market should handle all of that business. But… we’ve already decided that we’re going to be in the bailout business. So, my suggestion is predicated on that fact. IF we’re going to throw a bunch of money at the problem, then let’s at least throw it in the right direction. You mentioned price declines as an issue, and it’s a good one. Here’s my solution (related to what I discussed in the post above this one): Underwrite every loan as if it’s a rental. Obviously, most of the loans that would quality would be foreclosures and short sales which are by definition closer to the “bottom.” This would alleviate, although not eliminate, a large part of the “further decline” issue.
