thku4grace

The Government's Subprime 'Bailout' Plan Will Kill the Housing Market

As long as no taxpayer money is used, its fine to bring together all parties so as to slow the real estate market descent, somewhat. I believe it is still going to be a hard landing but a straight nosedive is never beneficial. If the government does not go beyond their current proposal I believe the pain will fall on all those that are at fault naturally. The foolish homeowners who either failed to read their contracts or simply cast all risk aside; the credit agencies who failed to rate this risk accurately will be in litigation and will lose their credibility; the hedge funds and investment banks that either held, packaged or sold these mortgage obligations will lose billions and last of all the government in years to come will have to confront their own foolish behavior in encouraging home loans for all those that couldn't afford it. Frankly, I see few politicians admitting to their misbehavior thus guaranteeing we will see more of this in the future.

The Government's Subprime 'Bailout' Plan Will Kill the Housing Market

While it is clear the author of this blog is aligned with those that want a huge taxpayer bailout of homeowners, some of what he is saying is true. This bailout is designed with one all-encompassing design flaw--it will only prolong the bear market in real estate. 1) Credit is going to be strict even for those that would have fairly qualified for a home loan in previous years. 2) Who is going to buy a home now that we are at record levels of homeownership? More ALT-A qualifiers? I think not! 3) While I'm not going to predict a recession in the immediate future, our economy will indeed take steps backward at some future date in the next few years which will extend the real estate bear market. 4) This plan is still voluntary, meaning banks aren't going to refinance those who are upside down unless borrowers are able to infuse more capital making their loan more consistent with the market. What this plan clearly does is push off the day of reckoning. Some will be okay due to unforseen financial windfalls, such as inheritance, landing that dream job with a fat pay increase, and winning the lotto.....but for most everyone else, there goes the credit! I believe those with an iffy situation living in California, Nevada, Florida, Ohio, or Michigan may find a better alternative to foreclosure by working out a deal with the bank to sell at a loss now, and refinancing the loss with a banking institution at a mutually agreeable fixed rate. Market values are only going to get worse later and that may make this scenario impossible. Foreclosure will all but guarantee apartment life for the next 10 years.