[Huckleberry]

I heard yesterday that, the last time the RTC was used was the S&L crisis. The govt took on something like 20 billion in bad debt and was able to sell off all but 3 billion, which the taxpayer had to swallow.

The RTC was supposed to be used for two years then dissolve, it had to be extended two times and ended up having an seven year lifespan because they could not sell the debt as fast as anticipated.

Just speculation but, I think this situation will be the same. The gov. will take on the bad debt, try to sell it, when markets won’t bear the risk they will resort to work w/ homeowners, then eventually foreclose and pass losses on to the taxpayer.

I guess my next two questions are:

1. At what point does the govt decide it’s prudent to lower the loan amount (or will they?), and what is the upper threshold of % write down before just foreclosing?

2. What does the govt do with a bunch of foreclosed/empty houses? Send them to REDC, HUD, or…?

[Huckleberry]

I heard yesterday that, the last time the RTC was used was the S&L crisis. The govt took on something like 20 billion in bad debt and was able to sell off all but 3 billion, which the taxpayer had to swallow.

The RTC was supposed to be used for two years then dissolve, it had to be extended two times and ended up having an seven year lifespan because they could not sell the debt as fast as anticipated.

Just speculation but, I think this situation will be the same. The gov. will take on the bad debt, try to sell it, when markets won’t bear the risk they will resort to work w/ homeowners, then eventually foreclose and pass losses on to the taxpayer.

I guess my next two questions are:

1. At what point does the govt decide it’s prudent to lower the loan amount (or will they?), and what is the upper threshold of % write down before just foreclosing?

2. What does the govt do with a bunch of foreclosed/empty houses? Send them to REDC, HUD, or…?

[Huckleberry]

I heard yesterday that, the last time the RTC was used was the S&L crisis. The govt took on something like 20 billion in bad debt and was able to sell off all but 3 billion, which the taxpayer had to swallow.

The RTC was supposed to be used for two years then dissolve, it had to be extended two times and ended up having an seven year lifespan because they could not sell the debt as fast as anticipated.

Just speculation but, I think this situation will be the same. The gov. will take on the bad debt, try to sell it, when markets won’t bear the risk they will resort to work w/ homeowners, then eventually foreclose and pass losses on to the taxpayer.

I guess my next two questions are:

1. At what point does the govt decide it’s prudent to lower the loan amount (or will they?), and what is the upper threshold of % write down before just foreclosing?

2. What does the govt do with a bunch of foreclosed/empty houses? Send them to REDC, HUD, or…?

[Huckleberry]

I heard yesterday that, the last time the RTC was used was the S&L crisis. The govt took on something like 20 billion in bad debt and was able to sell off all but 3 billion, which the taxpayer had to swallow.

The RTC was supposed to be used for two years then dissolve, it had to be extended two times and ended up having an seven year lifespan because they could not sell the debt as fast as anticipated.

Just speculation but, I think this situation will be the same. The gov. will take on the bad debt, try to sell it, when markets won’t bear the risk they will resort to work w/ homeowners, then eventually foreclose and pass losses on to the taxpayer.

I guess my next two questions are:

1. At what point does the govt decide it’s prudent to lower the loan amount (or will they?), and what is the upper threshold of % write down before just foreclosing?

2. What does the govt do with a bunch of foreclosed/empty houses? Send them to REDC, HUD, or…?

[Huckleberry]

So from what everyone is hearing this morning, is this bailout going to effectively “save” all of the upside down borrowers by means of the government taking all the bad mortgages, then renegotiating the loans down to market values?

If this is the case, it will artificially prop-up housing prices because foreclosures may slow substantially, hence disallowing the natural market to correct itself.

Or, is this plan just going to free up the credit markets so financial institutions will start lending to each other again?

[Huckleberry]

So from what everyone is hearing this morning, is this bailout going to effectively “save” all of the upside down borrowers by means of the government taking all the bad mortgages, then renegotiating the loans down to market values?

If this is the case, it will artificially prop-up housing prices because foreclosures may slow substantially, hence disallowing the natural market to correct itself.

Or, is this plan just going to free up the credit markets so financial institutions will start lending to each other again?

[Huckleberry]

So from what everyone is hearing this morning, is this bailout going to effectively “save” all of the upside down borrowers by means of the government taking all the bad mortgages, then renegotiating the loans down to market values?

If this is the case, it will artificially prop-up housing prices because foreclosures may slow substantially, hence disallowing the natural market to correct itself.

Or, is this plan just going to free up the credit markets so financial institutions will start lending to each other again?

[Huckleberry]

So from what everyone is hearing this morning, is this bailout going to effectively “save” all of the upside down borrowers by means of the government taking all the bad mortgages, then renegotiating the loans down to market values?

If this is the case, it will artificially prop-up housing prices because foreclosures may slow substantially, hence disallowing the natural market to correct itself.

Or, is this plan just going to free up the credit markets so financial institutions will start lending to each other again?

[Huckleberry]

So from what everyone is hearing this morning, is this bailout going to effectively “save” all of the upside down borrowers by means of the government taking all the bad mortgages, then renegotiating the loans down to market values?

If this is the case, it will artificially prop-up housing prices because foreclosures may slow substantially, hence disallowing the natural market to correct itself.

Or, is this plan just going to free up the credit markets so financial institutions will start lending to each other again?

[Huckleberry]

Agreed, if they pass legislation to that degree every homeowner that is upside down (or even close) in their mortgage, would stop making payments and do whatever it took to prove they couldn’t afford it. Solely to get their loan amount decreased. Even if it meant damaging their credit.

This would be the ultimate injustice to the American homeowner that has been responsibly servicing their loan, and to those that have been patiently waiting for prices to come back to norms.

[Huckleberry]

Agreed, if they pass legislation to that degree every homeowner that is upside down (or even close) in their mortgage, would stop making payments and do whatever it took to prove they couldn’t afford it. Solely to get their loan amount decreased. Even if it meant damaging their credit.

This would be the ultimate injustice to the American homeowner that has been responsibly servicing their loan, and to those that have been patiently waiting for prices to come back to norms.

[Huckleberry]

Agreed, if they pass legislation to that degree every homeowner that is upside down (or even close) in their mortgage, would stop making payments and do whatever it took to prove they couldn’t afford it. Solely to get their loan amount decreased. Even if it meant damaging their credit.

This would be the ultimate injustice to the American homeowner that has been responsibly servicing their loan, and to those that have been patiently waiting for prices to come back to norms.

[Huckleberry]

Agreed, if they pass legislation to that degree every homeowner that is upside down (or even close) in their mortgage, would stop making payments and do whatever it took to prove they couldn’t afford it. Solely to get their loan amount decreased. Even if it meant damaging their credit.

This would be the ultimate injustice to the American homeowner that has been responsibly servicing their loan, and to those that have been patiently waiting for prices to come back to norms.

[Huckleberry]

Agreed, if they pass legislation to that degree every homeowner that is upside down (or even close) in their mortgage, would stop making payments and do whatever it took to prove they couldn’t afford it. Solely to get their loan amount decreased. Even if it meant damaging their credit.

This would be the ultimate injustice to the American homeowner that has been responsibly servicing their loan, and to those that have been patiently waiting for prices to come back to norms.

[Huckleberry]

Excellent posts hipmatt and peterb.

Both of you make solid points which are based on solid reasoning and experience!!

[Author]

Posts