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Big Banks in Trouble: Huge Mortgage Write-Downs Seem Inevitable

Most people don't even know what the "current" value of their house is. ]

Maybe not... while they're current. But they take a KEEN interest in how much they owe once they do fall behind on payments. Don't think for a minute that people aren't doing the math to see if the LTV is within their tolerance level.

Many borrowers were stupid enough to take the loan they were given. But they're not stupid enough to keep it.

The Hole in the New Property Appraisal Rules

[If the whole idea is to get the appraisal system out of the banking/lending system]

The whole idea is to CREATE THE APPEARANCE of getting the appraisal system out of the banking/lending system.

Will the FHA Be the Next Government Bailout?

IME, they're making bad loans.

I'm seeing more FHA borrowers than before. This is probably due to the fact that FHA market share has increased, and the first wave of the sub-prime/ARM situation has subsided.

But when I look at the numbers these homeowners have, it's clear to me that these were "at the margin" loans, made to people who didn't have much of a monthly surplus to begin with, much less any reserves.

Add to this the continued weakening in the economy, and you've got more of a mess on your hands than we would have already had.

The Trouble with Rescues and Stimulus

[how can we ”rescue” and “stimulate” the economy without encouraging the “living beyond our means” mentality that is so harmful to the longer-term health of our economy?]

We can't- those two objectives are mutually exclusive.

Criticizing the banks for not immediately lending the money seems crazy to me.

Did they inject this capital to improve the health of the institutions? If so, then they should be allowed to decide how best to do that.

Taking that money and immediately loaning it just because they were scolded would later be seen as irresponsible. Then the legislators would have to castigate the banking industry for "making the problem worse."

You can't win when you have ignorant people deciding how we're going to "fix" the problem with government money.

Is the U.S. Banking System Safe?

[Home prices have historically tracked inflation and are likely to revert to the mean. ]

I agree with NY above that inflation is going to accelerate, but with all of the reasons that housing prices have to continue to decline, I'm wondering if house prices may decouple from that measure.