SK as you know my feelings are much different with regards to the policies that were implemented. The intended goals were met, however I feel they were met at a tremendous cost to the public. I believe that the following should have happened.
Let the foreclosure process run unfettered. No moratoriums, no slowdowns, no HARP, no HAMP, no loan modifications. Nothing. Granted that the delays in servicing were huge and caused by lack of foresight by the servicing entities to deal with the wave of short sales and foreclosures. However I also believe that if the servicing organizations were not pressed by the investors, they can act as slow as they want. If the investors were bailed out, then how much impetus do they have to press the servicers to foreclose or complete a short sale?
No bailouts should have been granted and tax revenues should not have been used to bailout the institutions that held the debt. I understand the magnitude of that statement and that many of the entities that had investments in that debt were mainstays of society. However I would have been okay with the govt keeping those investments above water directly.
I believe we would have had a much more robust recovery. I believe that housing prices would have dropped further to a much more affordable level. This would have enabled many people who were well behaved savers to take advantage and purchase property. This would have also enabled many middle class people who were financially stable to purchase rental properties. We would have formed local price bases in various cities in a much more natural manner. Yes it would have been a harder fall at first but it would have resulted in a firm price level and all of underlying assets attached to the bad debt would have been washed away. The holders of that bad debt would have an asset attached to it that was much less valuable. The govt would refund the difference in the principal to the investor directly.
I believe this would have accomplished several things. First off wash away all those who were underwater and simply could not afford to stay in a home they could not afford. They would move and rent and live within their means. There would be no more bad debt at the investment level. Finally I believe this would have been much more affordable then the trillions used for bailouts. Lastly base price levels would have been reached due to a glut of inventory. That inventory would slowly be sucked away. Now maybe we have inventory shortages but only because of organic reasons, no more of this, if you cannot afford the home, you get to stay anyways.
So yes, I agree with you that the goals of the policy implemented by the govt along with the snail like movement of the investors and servicers, and a few trillion of tax money worked. The market is more or less stable.
I simply believe we could have gotten better results for alot less money.
