Cora1

Plan Orange: Killing the Mortgage Crisis Quickly

I wonder how many people mix price (of a home or a stock) and value (which depends on use and assumption of future cash flows). Prices are in decline for a number of reasons, but prices are set by marginal buying and selling. In my view, the cheaper solution to the problem is one that adresses these marginal prices rather than the stock of outstanding homes. I am European and not familiar with the US housing market. From this fragile background, I would tend to suggest the government buying homes in foreclosure at a reasonable price, taking this marginal supply off the market for several years (rent out to former orwner with option to buy-back), refinance the property at lower rates and pay the bank mortgage with a discount (that will most likely be lower than the provivsioned value). Effect 1) Price pressure on housing market eases, 2) Risk on mortgage pool of banks reduced, 3) Reduced risk in prime and subprime assets results in positive price effects and profits at banks 4) equity capital recovers and so does ability to lend. 5) as prices of mortgage related assets recover due to lower risk, private investors will return to the market and take assets off the banks balance sheet. Greatful for feetback. (CORA-Capital@o2online...