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peterb.
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October 23, 2008 at 3:21 PM #292241October 23, 2008 at 3:33 PM #291865
carlsbadworker
ParticipantBush administration has recently indicated that the credit crunch has to be addressed at its source—in America’s housing market. Here are a few possible scenario:
- Luigi Zingales, of the University of Chicago, thinks the government should temporarily impose a standardised way to rejig the terms of securitised mortgages. He proposes that a 20% fall in a neighbourhood’s house prices from the time when the borrower bought his house would automatically trigger an option to alter the terms of a loan. Lenders would be forced to write off a chunk of the original loan, shrinking the mortgage in proportion to the fall in house prices. In return they would receive a share of future house-price gains.
- Martin Feldstein, who chaired Ronald Reagan’s Council of Economic Advisers (CEA) in the early 1980s, suggests creating “mortgage-replacement” loans to prevent distressed homeowners walking away from their debts. Under the plan, the government would provide low-cost (perhaps at 2%) loans to all mortgage holders, worth 20% of their outstanding mortgage debt.
- Another former CEA chairman, Glenn Hubbard, along with his Columbia University colleague, Chris Mayer, take a more radical approach. House prices could collapse, they reckon, because the downward pressure from foreclosures is made far worse by the scarcity and expense of home loans. To address this, the government should use Fannie Mae and Freddie Mac, the nationalised mortgage giants, to provide home loans to new and existing borrowers on terms that would be available if markets were working normally. They reckon the cost of a 30-year fixed-rate Fannie or Freddie mortgage is normally around 1.6 percentage points above the yield on ten-year government bonds, currently 3.7%. So the government could offer a benchmark 5.25% mortgage deal—matching the lowest rate in the past 30 years.
Source: Economist print edition Oct 23
October 23, 2008 at 3:33 PM #292185ParticipantBush administration has recently indicated that the credit crunch has to be addressed at its source—in America’s housing market. Here are a few possible scenario:
- Luigi Zingales, of the University of Chicago, thinks the government should temporarily impose a standardised way to rejig the terms of securitised mortgages. He proposes that a 20% fall in a neighbourhood’s house prices from the time when the borrower bought his house would automatically trigger an option to alter the terms of a loan. Lenders would be forced to write off a chunk of the original loan, shrinking the mortgage in proportion to the fall in house prices. In return they would receive a share of future house-price gains.
- Martin Feldstein, who chaired Ronald Reagan’s Council of Economic Advisers (CEA) in the early 1980s, suggests creating “mortgage-replacement” loans to prevent distressed homeowners walking away from their debts. Under the plan, the government would provide low-cost (perhaps at 2%) loans to all mortgage holders, worth 20% of their outstanding mortgage debt.
- Another former CEA chairman, Glenn Hubbard, along with his Columbia University colleague, Chris Mayer, take a more radical approach. House prices could collapse, they reckon, because the downward pressure from foreclosures is made far worse by the scarcity and expense of home loans. To address this, the government should use Fannie Mae and Freddie Mac, the nationalised mortgage giants, to provide home loans to new and existing borrowers on terms that would be available if markets were working normally. They reckon the cost of a 30-year fixed-rate Fannie or Freddie mortgage is normally around 1.6 percentage points above the yield on ten-year government bonds, currently 3.7%. So the government could offer a benchmark 5.25% mortgage deal—matching the lowest rate in the past 30 years.
Source: Economist print edition Oct 23
October 23, 2008 at 3:33 PM #292217ParticipantBush administration has recently indicated that the credit crunch has to be addressed at its source—in America’s housing market. Here are a few possible scenario:
- Luigi Zingales, of the University of Chicago, thinks the government should temporarily impose a standardised way to rejig the terms of securitised mortgages. He proposes that a 20% fall in a neighbourhood’s house prices from the time when the borrower bought his house would automatically trigger an option to alter the terms of a loan. Lenders would be forced to write off a chunk of the original loan, shrinking the mortgage in proportion to the fall in house prices. In return they would receive a share of future house-price gains.
- Martin Feldstein, who chaired Ronald Reagan’s Council of Economic Advisers (CEA) in the early 1980s, suggests creating “mortgage-replacement” loans to prevent distressed homeowners walking away from their debts. Under the plan, the government would provide low-cost (perhaps at 2%) loans to all mortgage holders, worth 20% of their outstanding mortgage debt.
- Another former CEA chairman, Glenn Hubbard, along with his Columbia University colleague, Chris Mayer, take a more radical approach. House prices could collapse, they reckon, because the downward pressure from foreclosures is made far worse by the scarcity and expense of home loans. To address this, the government should use Fannie Mae and Freddie Mac, the nationalised mortgage giants, to provide home loans to new and existing borrowers on terms that would be available if markets were working normally. They reckon the cost of a 30-year fixed-rate Fannie or Freddie mortgage is normally around 1.6 percentage points above the yield on ten-year government bonds, currently 3.7%. So the government could offer a benchmark 5.25% mortgage deal—matching the lowest rate in the past 30 years.
Source: Economist print edition Oct 23
October 23, 2008 at 3:33 PM #292223ParticipantBush administration has recently indicated that the credit crunch has to be addressed at its source—in America’s housing market. Here are a few possible scenario:
- Luigi Zingales, of the University of Chicago, thinks the government should temporarily impose a standardised way to rejig the terms of securitised mortgages. He proposes that a 20% fall in a neighbourhood’s house prices from the time when the borrower bought his house would automatically trigger an option to alter the terms of a loan. Lenders would be forced to write off a chunk of the original loan, shrinking the mortgage in proportion to the fall in house prices. In return they would receive a share of future house-price gains.
- Martin Feldstein, who chaired Ronald Reagan’s Council of Economic Advisers (CEA) in the early 1980s, suggests creating “mortgage-replacement” loans to prevent distressed homeowners walking away from their debts. Under the plan, the government would provide low-cost (perhaps at 2%) loans to all mortgage holders, worth 20% of their outstanding mortgage debt.
- Another former CEA chairman, Glenn Hubbard, along with his Columbia University colleague, Chris Mayer, take a more radical approach. House prices could collapse, they reckon, because the downward pressure from foreclosures is made far worse by the scarcity and expense of home loans. To address this, the government should use Fannie Mae and Freddie Mac, the nationalised mortgage giants, to provide home loans to new and existing borrowers on terms that would be available if markets were working normally. They reckon the cost of a 30-year fixed-rate Fannie or Freddie mortgage is normally around 1.6 percentage points above the yield on ten-year government bonds, currently 3.7%. So the government could offer a benchmark 5.25% mortgage deal—matching the lowest rate in the past 30 years.
Source: Economist print edition Oct 23
October 23, 2008 at 3:33 PM #292261ParticipantBush administration has recently indicated that the credit crunch has to be addressed at its source—in America’s housing market. Here are a few possible scenario:
- Luigi Zingales, of the University of Chicago, thinks the government should temporarily impose a standardised way to rejig the terms of securitised mortgages. He proposes that a 20% fall in a neighbourhood’s house prices from the time when the borrower bought his house would automatically trigger an option to alter the terms of a loan. Lenders would be forced to write off a chunk of the original loan, shrinking the mortgage in proportion to the fall in house prices. In return they would receive a share of future house-price gains.
- Martin Feldstein, who chaired Ronald Reagan’s Council of Economic Advisers (CEA) in the early 1980s, suggests creating “mortgage-replacement” loans to prevent distressed homeowners walking away from their debts. Under the plan, the government would provide low-cost (perhaps at 2%) loans to all mortgage holders, worth 20% of their outstanding mortgage debt.
- Another former CEA chairman, Glenn Hubbard, along with his Columbia University colleague, Chris Mayer, take a more radical approach. House prices could collapse, they reckon, because the downward pressure from foreclosures is made far worse by the scarcity and expense of home loans. To address this, the government should use Fannie Mae and Freddie Mac, the nationalised mortgage giants, to provide home loans to new and existing borrowers on terms that would be available if markets were working normally. They reckon the cost of a 30-year fixed-rate Fannie or Freddie mortgage is normally around 1.6 percentage points above the yield on ten-year government bonds, currently 3.7%. So the government could offer a benchmark 5.25% mortgage deal—matching the lowest rate in the past 30 years.
Source: Economist print edition Oct 23
October 23, 2008 at 3:47 PM #291886ibjames
Participant[quote=SD Realtor]DJC there is not anything we can do. The post was simply meant to be informative. At the beginning of this thing I was trying to project market bottom based on a unregulated or lightly regulated fall. As federal efforts began to grow it became clear long ago that this cycle would be challenging to predict.
If there is anyone here (Rich included) who foresaw the sheer size of the intervention we are seeing and will continue to see then good for them. While a few like myself starting posting these sorts of warnings, I doubt any of us, me for sure could envision something of this magnitude.
To turn a blind eye to it and say it will not affect the cycle is naive at best. To me this is simply going to help nudge us towards a Japan style real estate market that will be quite drawn out and long.
[/quote]
the odd thing is that they are steering this boat towards that after seeing Japan have those troubles.perhaps it’s the best scenario they can hope for compared to an epic bust
October 23, 2008 at 3:47 PM #292205Participant[quote=SD Realtor]DJC there is not anything we can do. The post was simply meant to be informative. At the beginning of this thing I was trying to project market bottom based on a unregulated or lightly regulated fall. As federal efforts began to grow it became clear long ago that this cycle would be challenging to predict.
If there is anyone here (Rich included) who foresaw the sheer size of the intervention we are seeing and will continue to see then good for them. While a few like myself starting posting these sorts of warnings, I doubt any of us, me for sure could envision something of this magnitude.
To turn a blind eye to it and say it will not affect the cycle is naive at best. To me this is simply going to help nudge us towards a Japan style real estate market that will be quite drawn out and long.
[/quote]
the odd thing is that they are steering this boat towards that after seeing Japan have those troubles.perhaps it’s the best scenario they can hope for compared to an epic bust
October 23, 2008 at 3:47 PM #292237Participant[quote=SD Realtor]DJC there is not anything we can do. The post was simply meant to be informative. At the beginning of this thing I was trying to project market bottom based on a unregulated or lightly regulated fall. As federal efforts began to grow it became clear long ago that this cycle would be challenging to predict.
If there is anyone here (Rich included) who foresaw the sheer size of the intervention we are seeing and will continue to see then good for them. While a few like myself starting posting these sorts of warnings, I doubt any of us, me for sure could envision something of this magnitude.
To turn a blind eye to it and say it will not affect the cycle is naive at best. To me this is simply going to help nudge us towards a Japan style real estate market that will be quite drawn out and long.
[/quote]
the odd thing is that they are steering this boat towards that after seeing Japan have those troubles.perhaps it’s the best scenario they can hope for compared to an epic bust
October 23, 2008 at 3:47 PM #292244Participant[quote=SD Realtor]DJC there is not anything we can do. The post was simply meant to be informative. At the beginning of this thing I was trying to project market bottom based on a unregulated or lightly regulated fall. As federal efforts began to grow it became clear long ago that this cycle would be challenging to predict.
If there is anyone here (Rich included) who foresaw the sheer size of the intervention we are seeing and will continue to see then good for them. While a few like myself starting posting these sorts of warnings, I doubt any of us, me for sure could envision something of this magnitude.
To turn a blind eye to it and say it will not affect the cycle is naive at best. To me this is simply going to help nudge us towards a Japan style real estate market that will be quite drawn out and long.
[/quote]
the odd thing is that they are steering this boat towards that after seeing Japan have those troubles.perhaps it’s the best scenario they can hope for compared to an epic bust
October 23, 2008 at 3:47 PM #292281Participant[quote=SD Realtor]DJC there is not anything we can do. The post was simply meant to be informative. At the beginning of this thing I was trying to project market bottom based on a unregulated or lightly regulated fall. As federal efforts began to grow it became clear long ago that this cycle would be challenging to predict.
If there is anyone here (Rich included) who foresaw the sheer size of the intervention we are seeing and will continue to see then good for them. While a few like myself starting posting these sorts of warnings, I doubt any of us, me for sure could envision something of this magnitude.
To turn a blind eye to it and say it will not affect the cycle is naive at best. To me this is simply going to help nudge us towards a Japan style real estate market that will be quite drawn out and long.
[/quote]
the odd thing is that they are steering this boat towards that after seeing Japan have those troubles.perhaps it’s the best scenario they can hope for compared to an epic bust
October 23, 2008 at 4:43 PM #291911SD Realtor
ParticipantCounselor characterized the result best. This is simply adding order (at huge taxpayer expense) and yes (it appears to hell with moral hazard)…
From a practical perspective show me anyone in the government who is not pulling for this.
Anybody? Does anyone have any names?
This post was not meant to say that this will prop things up at all. Yet to think that this will not affect the depreciation cycle at all is a true fallacy. In my opinion it creates a huge moral hazard but haven’t we already breeched that levy? I mean come on now let’s be practical. I was hopeful that by now we would have already seen several lawsuits challenging these workouts and I haven’t seen or heard of a single one!
Huckleberry, go to the links I posted. Go read about this FDIC chairperson. Let me tell you something my friend, if it was up to Barney Frank HELL YES the maid would get to stay in the damn home.
What sort of backlash will there be? Well let’s see, we have recently seen our congress pass a bill that was rejected by a SUBSTANTIAL majority of the population. Doesn’t appear to me that backlash is really on anyones mind right now. There is a short sale right near me in Scripps on Chardonay. The guy has a freeking 30 foot boat right in front of the house along with his RV. I WISH there would be a backlash and frankly I am amazed there has not been.
Regarding the recession, yes I believe, as I have said, that it will act as a major counter balance. Yet REGARDLESS of who is president, it is in no way inconceivable to me that there could be federal intervention to laid off individuals that they cannot lose thier homes.
Tell me, would this surprise you?
The only surprise to me is that there is still this belief by many people here that things like moral hazard will prevent the government from taking any steps. That the government will or will not do something in the interest of the people. That is so far from the real agenda of the government that it is almost laughable.
There is not any question whether this is right or wrong morally, or whether this will help or hurt pricing… It doesn’t matter. It is what will happen. It will reduce the foreclosure inventory. It will NOT halt the cycle but it WILL change the cycle.
(and yes these people don’t get write downs or rate mods for free. any profits I believe go back to the government or entity that provided the relief)
October 23, 2008 at 4:43 PM #292230ParticipantCounselor characterized the result best. This is simply adding order (at huge taxpayer expense) and yes (it appears to hell with moral hazard)…
From a practical perspective show me anyone in the government who is not pulling for this.
Anybody? Does anyone have any names?
This post was not meant to say that this will prop things up at all. Yet to think that this will not affect the depreciation cycle at all is a true fallacy. In my opinion it creates a huge moral hazard but haven’t we already breeched that levy? I mean come on now let’s be practical. I was hopeful that by now we would have already seen several lawsuits challenging these workouts and I haven’t seen or heard of a single one!
Huckleberry, go to the links I posted. Go read about this FDIC chairperson. Let me tell you something my friend, if it was up to Barney Frank HELL YES the maid would get to stay in the damn home.
What sort of backlash will there be? Well let’s see, we have recently seen our congress pass a bill that was rejected by a SUBSTANTIAL majority of the population. Doesn’t appear to me that backlash is really on anyones mind right now. There is a short sale right near me in Scripps on Chardonay. The guy has a freeking 30 foot boat right in front of the house along with his RV. I WISH there would be a backlash and frankly I am amazed there has not been.
Regarding the recession, yes I believe, as I have said, that it will act as a major counter balance. Yet REGARDLESS of who is president, it is in no way inconceivable to me that there could be federal intervention to laid off individuals that they cannot lose thier homes.
Tell me, would this surprise you?
The only surprise to me is that there is still this belief by many people here that things like moral hazard will prevent the government from taking any steps. That the government will or will not do something in the interest of the people. That is so far from the real agenda of the government that it is almost laughable.
There is not any question whether this is right or wrong morally, or whether this will help or hurt pricing… It doesn’t matter. It is what will happen. It will reduce the foreclosure inventory. It will NOT halt the cycle but it WILL change the cycle.
(and yes these people don’t get write downs or rate mods for free. any profits I believe go back to the government or entity that provided the relief)
October 23, 2008 at 4:43 PM #292262ParticipantCounselor characterized the result best. This is simply adding order (at huge taxpayer expense) and yes (it appears to hell with moral hazard)…
From a practical perspective show me anyone in the government who is not pulling for this.
Anybody? Does anyone have any names?
This post was not meant to say that this will prop things up at all. Yet to think that this will not affect the depreciation cycle at all is a true fallacy. In my opinion it creates a huge moral hazard but haven’t we already breeched that levy? I mean come on now let’s be practical. I was hopeful that by now we would have already seen several lawsuits challenging these workouts and I haven’t seen or heard of a single one!
Huckleberry, go to the links I posted. Go read about this FDIC chairperson. Let me tell you something my friend, if it was up to Barney Frank HELL YES the maid would get to stay in the damn home.
What sort of backlash will there be? Well let’s see, we have recently seen our congress pass a bill that was rejected by a SUBSTANTIAL majority of the population. Doesn’t appear to me that backlash is really on anyones mind right now. There is a short sale right near me in Scripps on Chardonay. The guy has a freeking 30 foot boat right in front of the house along with his RV. I WISH there would be a backlash and frankly I am amazed there has not been.
Regarding the recession, yes I believe, as I have said, that it will act as a major counter balance. Yet REGARDLESS of who is president, it is in no way inconceivable to me that there could be federal intervention to laid off individuals that they cannot lose thier homes.
Tell me, would this surprise you?
The only surprise to me is that there is still this belief by many people here that things like moral hazard will prevent the government from taking any steps. That the government will or will not do something in the interest of the people. That is so far from the real agenda of the government that it is almost laughable.
There is not any question whether this is right or wrong morally, or whether this will help or hurt pricing… It doesn’t matter. It is what will happen. It will reduce the foreclosure inventory. It will NOT halt the cycle but it WILL change the cycle.
(and yes these people don’t get write downs or rate mods for free. any profits I believe go back to the government or entity that provided the relief)
October 23, 2008 at 4:43 PM #292269ParticipantCounselor characterized the result best. This is simply adding order (at huge taxpayer expense) and yes (it appears to hell with moral hazard)…
From a practical perspective show me anyone in the government who is not pulling for this.
Anybody? Does anyone have any names?
This post was not meant to say that this will prop things up at all. Yet to think that this will not affect the depreciation cycle at all is a true fallacy. In my opinion it creates a huge moral hazard but haven’t we already breeched that levy? I mean come on now let’s be practical. I was hopeful that by now we would have already seen several lawsuits challenging these workouts and I haven’t seen or heard of a single one!
Huckleberry, go to the links I posted. Go read about this FDIC chairperson. Let me tell you something my friend, if it was up to Barney Frank HELL YES the maid would get to stay in the damn home.
What sort of backlash will there be? Well let’s see, we have recently seen our congress pass a bill that was rejected by a SUBSTANTIAL majority of the population. Doesn’t appear to me that backlash is really on anyones mind right now. There is a short sale right near me in Scripps on Chardonay. The guy has a freeking 30 foot boat right in front of the house along with his RV. I WISH there would be a backlash and frankly I am amazed there has not been.
Regarding the recession, yes I believe, as I have said, that it will act as a major counter balance. Yet REGARDLESS of who is president, it is in no way inconceivable to me that there could be federal intervention to laid off individuals that they cannot lose thier homes.
Tell me, would this surprise you?
The only surprise to me is that there is still this belief by many people here that things like moral hazard will prevent the government from taking any steps. That the government will or will not do something in the interest of the people. That is so far from the real agenda of the government that it is almost laughable.
There is not any question whether this is right or wrong morally, or whether this will help or hurt pricing… It doesn’t matter. It is what will happen. It will reduce the foreclosure inventory. It will NOT halt the cycle but it WILL change the cycle.
(and yes these people don’t get write downs or rate mods for free. any profits I believe go back to the government or entity that provided the relief)
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