$700 Billion plan should include

[tripods68]

to allow existing homeowner's to REFI with lower interest rate and at the current value of the home (city or location) NOT in Foreclosure and with good FICO scores through Fannie and Freddie.

I know its a wishful thinking but then again, we already bailed out AIG, Fannie Freddie, and Bear Stearns. By the way how that work out?

[jIM_Ohio]

The government will own the loan and the current loan payments go into the treasury to repay the 700 billion. There is a good possibility if employment stays high that the treasury collects upwards of a trillion in revenue and makes a profit on the 700 billion.

If you wrote off the "lost equity" the 700 billion bailout might only collect 500 billion, 300 billion or less in payments over next 30 years or so.

The lost equity is short term. The government will only lose money on the 700 billion investment if
a) people have homes forclosed on
b) the US is overthrown by a foreign power
c) there is massive deflation
d) combinations of all of the above happen

[cptacek]

So if the government has the mortgage on your house, and you can't pay the mortgage, can they come after you like they can for student loans or non-payment of child support? Garnishments? Jail? Your name in the paper saying you are a deadbeat?

Serious question. Not trolling, I swear!

[tripods68]

cptackek,

Good question. I think what has happened all the bad loans (toxic mortgages) were put into one bucket along with all the AAA rated bonds. Unfortunately those same bonds are worthless combined with subprimes---were simply "written off" using mark-to-market accounting. That's what the whole bail out was all about. The government (King Henry) then takes over the bad loans and if it works out in the long run (if people pay their mortgages on time) those mortgages will go up in value enough to make up for all the losses plus interest.

[tmvijai]

Initial thought was really good. Since everybody saying its a buyout plan and tax payer is going to pay. Don't you think we should also get a cut from the profit. How about when treasury makes the profit out of $700 b, they should cut a rebate check out to all the taxpayers and share the profit. How wonderful would that be? The only other question, what happens if they make loss. As usual, it will be written off to uncle sam's account.

On the second question about government coming after, they surely will come after you. These loans will be still serviced by the servicer who is going to come after every home owners and try to not to foreclose it. IF foreclosed, its a loss for all. So they will try to work out and not foreclose and get payments somehow in order to atleast break even..

[kork13]

Initial thought was really good. Since everybody saying its a buyout plan and tax payer is going to pay. Don't you think we should also get a cut from the profit. How about when treasury makes the profit out of $700 b, they should cut a rebate check out to all the taxpayers and share the profit. How wonderful would that be? The only other question, what happens if they make loss. As usual, it will be written off to uncle sam's account.

What more likely will happen is that this $700B will be written as a cost to the current year's budget (or for the gradiated lumps after the proposed in the current bill, in the budget for those years). Essentially, it is a sunk cost, adding further to the national debt. Money repaid would then go toward paying back the same national debt. It's largely semantics, but I think it's worth pointing out--it's not like they're taking money from a theoretical savings account and will be adding back into that account later.

As for what to do with any potential profit, I'd like to see any and all profits we see from recent economic actions go toward reducing our national debt. I don't even know how many trillions it is, but I'd prefer see that go away than get a fun little check from the USG.

[tmvijai]

You got it right. Thats exactly right which I been reading all over the place. It is going to pile up the nation Debt and who is going to clear the mess nobody knows. Even if it makes profit, they might not use to clear the debt. They might use it for something when that time arrives. Who knows!!

[tripods68]

Initial thought was really good. Since everybody saying its a buyout plan and tax payer is going to pay. Don't you think we should also get a cut from the profit. How about when treasury makes the profit out of $700 b, they should cut a rebate check out to all the taxpayers and share the profit. How wonderful would that be? The only other question, what happens if they make loss. As usual, it will be written off to uncle sam's account.

On the second question about government coming after, they surely will come after you. These loans will be still serviced by the servicer who is going to come after every home owners and try to not to foreclose it. IF foreclosed, its a loss for all. So they will try to work out and not foreclose and get payments somehow in order to atleast break even..

I agree in some ways taxpayers should profit from this since not everyone participated in it either through reduced tax rate or more deductions allowable. However, it should address the potential foreclosures in the coming months or year those that simply want to REFI (turn adjustment to fixed loan) but can't since being up side down.

[cptacek]

cptackek,

Good question. I think what has happened all the bad loans (toxic mortgages) were put into one bucket along with all the AAA rated bonds. Unfortunately those same bonds are worthless combined with subprimes---were simply "written off" using mark-to-market accounting. That's what the whole bail out was all about. The government (King Henry) then takes over the bad loans and if it works out in the long run (if people pay their mortgages on time) those mortgages will go up in value enough to make up for all the losses plus interest.

I understand what got us here. I'm asking about in the future. Let's say the government does get into the mortgage business. Real businesses (should) figure out how likely someone is to pay and price the interest rate accordingly, or even decide not to lend to them if the risk is high enough. (There is a reason that people with bad credit get bad interest rates. They earned them.) So, now, in our hypothetical future here, the government has a bunch of mortgages. Some people pay, and it is just like paying for a normal mortgage.

What if they don't pay? Hence my original question. Does the government just let them off? So no consequences? Or does the government REALLY go after them, with garnishments, jail, etc?

[tripods68]

cpteck,

"Let's say the government does get into the mortgage business"

I don't really understand your real question. Government is already in the mortgage business by way securitizing all Freddie and Fannie loans originations outstanding worths Trillions eversince they were established albeit quasi run mortgage government programs. Paulson just bail those guys out this year. As far the last questions, I don't know the answer. But we do know, thousands of people already foreclosed on their homes are marked with bad credit for the next 5 years.

[kork13]

However, it should address the potential foreclosures in the coming months or year those that simply want to REFI (turn adjustment to fixed loan) but can't since being up side down.

I've heard this many times, but am curious... how would this be addressed? You can't simply say 'do it' and it'll happen like magic. Mortgage backers would be acting irresponsibly to refinance the "upside down" loans point blank, and I'm not certain of a good way to go about making this actually work.

[tripods68]

I've heard this many times, but am curious... how would this be addressed? You can't simply say 'do it' and it'll happen like magic. Mortgage backers would be acting irresponsibly to refinance the "upside down" loans point blank, and I'm not certain of a good way to go about making this actually work.

This is part of the bail out package that is being debated--companies can sell or dump all their toxic mortgage subprimes loans to Treasury. In return, taxpayers (US Treasury) will take ownership (preferred stocks) similary to AIG bail out loan package worth $85 Billion (80% ownership). Over time that about 85 Billion will be paid off by way of increased stock price. Something like that has to happen.

More importantly lenders/brokers needs oversight regulations (requiring higher FICO scores, eliminate liar loans or no docs, require lower Debt/Income ratio from 43% to 35%, 10% minimum downpayment) something like that to protect taxpayers in the future.

[kork13]

I agree in some ways taxpayers should profit from this since not everyone participated in it either through reduced tax rate or more deductions allowable. However, it should address the potential foreclosures in the coming months or year those that simply want to REFI (turn adjustment to fixed loan) but can't since being up side down.

I've heard this many times, but am curious... how would this be addressed? You can't simply say 'do it' and it'll happen like magic. Mortgage backers would be acting irresponsibly to refinance the "upside down" loans point blank, and I'm not certain of a good way to go about making this actually work.

This is part of the bail out package that is being debated--companies can sell or dump all their toxic mortgage subprimes loans to Treasury. In return, taxpayers (US Treasury) will take ownership (preferred stocks) similary to AIG bail out loan package worth $85 Billion (80% ownership). Over time that about 85 Billion will be paid off by way of increased stock price. Something like that has to happen.

Am I to understand this that the current proposal provides people the ability to refinance to a fixed-rate mortgage with the USG regardless of current assessed home values? If so, this has been terribly under-reported...

I just don't see the connection between the Treasury owning preferred stocks being the answer to those who face ballooning home payments......

[tripods68]

I just don't see the connection between the Treasury owning preferred stocks being the answer to those who face ballooning home payments......

I don't pretend to know the real answer

[kork13]

I don't pretend to know the real answer

hahaha that's okay, I think I can forgive you..... I'm not sure if the politicians in D.C. know the real answer to that one, so whatever... ^_^