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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
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
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
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 20, 2008 at 1:39 PM in reply to: October 21st – a date to be remembered as when the floor falls out #290211ParticipantTomorrow is Oct 21 and I am wondering what your dommsday forecasters have been doing. As Buffett once said: “Predicting rain doesn’t count; building the ark does.”
So do you all have stored enough cash, gold and ammo? Or only plan to get some orgie tonight!October 20, 2008 at 1:39 PM in reply to: October 21st – a date to be remembered as when the floor falls out #290519ParticipantTomorrow is Oct 21 and I am wondering what your dommsday forecasters have been doing. As Buffett once said: “Predicting rain doesn’t count; building the ark does.”
So do you all have stored enough cash, gold and ammo? Or only plan to get some orgie tonight!October 20, 2008 at 1:39 PM in reply to: October 21st – a date to be remembered as when the floor falls out #290524ParticipantTomorrow is Oct 21 and I am wondering what your dommsday forecasters have been doing. As Buffett once said: “Predicting rain doesn’t count; building the ark does.”
So do you all have stored enough cash, gold and ammo? Or only plan to get some orgie tonight!October 20, 2008 at 1:39 PM in reply to: October 21st – a date to be remembered as when the floor falls out #290558ParticipantTomorrow is Oct 21 and I am wondering what your dommsday forecasters have been doing. As Buffett once said: “Predicting rain doesn’t count; building the ark does.”
So do you all have stored enough cash, gold and ammo? Or only plan to get some orgie tonight!October 20, 2008 at 1:39 PM in reply to: October 21st – a date to be remembered as when the floor falls out #290562ParticipantTomorrow is Oct 21 and I am wondering what your dommsday forecasters have been doing. As Buffett once said: “Predicting rain doesn’t count; building the ark does.”
So do you all have stored enough cash, gold and ammo? Or only plan to get some orgie tonight!October 6, 2008 at 11:22 AM in reply to: Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt #282046ParticipantHelicopter Ben? He needs at least a Boeing 747. In fact, Airbus A380 will do better.
October 6, 2008 at 11:22 AM in reply to: Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt #282325ParticipantHelicopter Ben? He needs at least a Boeing 747. In fact, Airbus A380 will do better.
October 6, 2008 at 11:22 AM in reply to: Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt #282328ParticipantHelicopter Ben? He needs at least a Boeing 747. In fact, Airbus A380 will do better.
October 6, 2008 at 11:22 AM in reply to: Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt #282369ParticipantHelicopter Ben? He needs at least a Boeing 747. In fact, Airbus A380 will do better.
October 6, 2008 at 11:22 AM in reply to: Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt #282382ParticipantHelicopter Ben? He needs at least a Boeing 747. In fact, Airbus A380 will do better.
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