Obama to Ban All Foreclosures

Obama May Prohibit Home-Loan Foreclosures Without HAMP Review

Feb. 25 (Bloomberg) — The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”

She confirmed the authenticity of the document, which hasn’t been made public.

http://www.businessweek.com/news/2010-02-25/obama-may-prohibit-home-loan-foreclosures-without-hamp-review.html

This should definitely put a floor in housing prices if its effective.

The Mortgage Bankers Association has their proposals as well.

http://www.nytimes.com/2010/02/26/business/economy/26modify.html?ref=todayspaper

Sheila Bair's proposal is better.

Why not ban losses on stock purchases. I'd be for that.

LOL...all this does is postpone the day of healing for real estate...it postpones inevitable losses

"Why not ban losses on stock purchases."

Don't be a douche.

Because people are in danger of losing their HOMES, after having lost their JOBS, thanks to the banks phucking up the economy in the first place.

yeah..so...prop up the re market so more innocent people can pay too much for homes.....

how is that good?

"thanks to the banks phucking up the economy in the first place."

Ohhhh, so the BANKS bought all those houses at B.S. prices? And the CURE for this is ... something that will PREVENT housing prices from normalizing. How interesting. You know what? Let's just outlaw big animals eating little animals...that would be REALLY nice. And about as lasting as Obammy's outlawing of real estate prices correcting.

"yeah..so...prop up the re market so more innocent people can pay too much for homes.....

how is that good?"

Keeping people from losing their homes is "good".

We're not talking about "propping up the market".

"Ohhhh, so the BANKS bought all those houses at B.S. prices?"

Most people bought WITHIN THEIR BUDGETS, whether or not YOU happen to think the prices were "BS".

The problem with many facing foreclosure now is that they have no JOBS, thanks to the implosion of the economy brought on by the reckless speculation by banks.

It doesn't take a genius to see this.

Matt...come on...you simply can't ignore the fact that propping up re prices just makes MORE people pay too much

"Matt...come on...you simply can't ignore the fact that propping up re prices just makes MORE people pay too much"

Keeping people in their homes is not "propping up home prices". Their homes are NOT ON THE MARKET.

' whether or not YOU happen to think the prices were "BS". '

LOL! So the global real real estate bubble was something I "thought". You know what I love about liberals? How, like little children, they live in a fantasy world and don't feel the least bit obligated to try to justify, explain or rationalize their fantasies. At least kids are cute...

BTW, I think it's funny that SE's two gayest members, Matt & jimstreeteasy, are hissing and scratching at each other. Fear not; it'll end in kisses...

yeah, it's matt's first argument...

MACHO BUFFOON WROTE: "At least kids are cute..."...: oh my, he may be more dangerous than i thought.

Whatever you say, twinkletoes...

still waiting for the explanation of where in manhattan you find the babes who like anti-black, anti-gay, bigoted (wasn't clear what you were say9ing on the setai thread about ethnicity), anti-women MACHO BUFFOON ?....tell us., cause, you know what, it sounds ridiculous....

"explanation of where in manhattan you find the babes ....cause, you know what, it sounds ridiculous...."

You won't understand the explanation, but here it is: Chicks dig A-holes. Sensitive, Alan Alda types who appear to have a shaky sense of sexual identity? Not so much...

"Sensitive, Alan Alda types.."

that's the nicest thing anyone has said about me all day...I didn't think you had noticed..Thanks !!!

All these banks should just be stuffed with these homes that are worth less then the outstanding loans.

Matt in fairness those homes would be on the market if they were foreclosed.

PS: Hugh-G are you for real?

Matt...Just in terms of pure economics, not distorted by bs accounting, banks might take the properties and maybe rent back to the people for the time being . I don't even think your idea -- leave them there -- helps these people because it still leaves them with a liability that exceeds the value of the asset they still own. It just perpetuates the illusion that they own an asset when in reality they have as little equity as the rent down the street.

yeah...by the way...matt...if we let the market go to rational prices then more people can buy at lower prices..and renters can rent at lower prices....THE SOCIAL EQUITY DOES NOT ACTUALLY ON BALANCE FAVOR MoRE GOVERNMENT DISTORTION

When an investor buys a bond, and the company goes bankrupt, the investor loses. The mortgage is a bond...the house is collateral. Its sad but these people need to walk away from their mortgages. It serves the banks right for contributing to this bubble with bullshit loans and packaging them with 40x leverage.

Rhino - yes, totally for real. WHat, you doubt chicks dig a-holes?? You're joking, right?

...and just to finish the thought, that's why Hugh gets so much tail! I mean, my DPV is extraordinarily low...miniscule, in fact...

"Matt in fairness those homes would be on the market if they were foreclosed."

Rhino, in fairness, if they were foreclosed, where would those jobless families go?

I understand...but that is more of a symptom than an illness. We probably should have bailed out the people instead of the banks. Its not an easy question. I am not sure its Citigroups role to be an agent of welfare.

Hugh, I don't doubt chicks did a-holes...especially young chicks. I just think you aren't as much of a clown as you are making out to be.

The funny thing is, the American Dream of home ownership would flow to the prudent savers if we allowed prices to find their downside level.

"I just think you aren't as much of a clown as you are making out to be. "

Not true, Rhino! I'm a complete A-hole. I'm a bastard. I'm a son-of-a-bitch. Now that I've admitted all that, Matt and Jim are deprived of their ability to call me names; i've already admitted to being those things.

"he funny thing is, the American Dream of home ownership would flow to the prudent savers if we allowed prices to find their downside level."

The REALLY funny thing is that this new wave of foreclosures includes those "prudent savers" who bought within their means, but who lost their jobs and now have NO savings and can't pay their mortgages.

Again -- if they're tossed out on their asses, where do you propose these "prudent savers" go next, with no savings and no income?

"where do you propose these "prudent savers" go next, with no savings and no income?"

I don't know many hard-workign "prudent savers" with no jobs and no income. I know MANY prudent savers who felt they COULD NOT buy in the bubble, because the prices were so ridiculous, and still sit on the sidelines today. They are not natural renters, but in NYC in 2010 they rent, because prices still haven't fully corrected. Knew a guy in the same situation in LA in the 1990's...he finally bought in 1997 when prices normalized, but for 10 yrs the guy waited on the sidelines! And he made over $1M a year!

Riddle me this Matt...explain to me why unemployed owners should have a free place to live while unemployed renters do not? Theres a huge transfer of wealth going on here from those who didnt take the plunge to those who did. It doesnt make logical sense. I am the first to say we need to do better by the unemployed and the lower class... But this has nothing actually to do with owners vs renters. The system should be so rigged to favor those who take debt to buy homes...in many cases with little or no down payment.

" don't know many hard-workign "prudent savers" with no jobs and no income."

Well I do. I know quite a few victims of the Obama Economy who've been out of work for more than a year.

Open your eyes and I'm sure you'll see them, too.

"Open your eyes and I'm sure you'll see them, too."

lol. WHERE YOU THINK I LIVE, B*TCH?? La-la-land?

Rhino86
about 6 hours ago
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Riddle me this Matt...

Who taught you that phrase, you big meathead?

This is more the unwind of the Reagan/Greenspan era of deregulation than it is anything Obama did. There is also something know as the business cycle. Matt you didn't answer me why "owners" should have a free place to live c/o Citigroup while they look for a job, but renters should not.

One can't ignore that the market with the biggest bubble had the biggest government hand. The policy of increasing home ownership was an abject failure because it favored increasing the number of people owning without consideration of the affordability of these homes. The margin buyer was greatly harmed by buying into the policy. The best fix to the housing problem would be to allow market forces to function. Propping up prices never works and only limits new buyers from entering the market.

Ronald Regan was right....
"The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"

Greenspan was right. He said "We thought finance could regulate itself. We were wrong." The right keeps harping on the loans, but it was packaging the loans, selling them, then selling insurance on them, with a razor thing equity margin, that did us in. However, this is far too nuanced for a Fox News soundbite.

Are you confused? Lets try it another way. You take a bad government idea. Then the banks lever that bad idea 40x, because no one is really watching or regulating. Who is responsible for the devastation? I can tell you who is responsible for 39/40ths of it, by definition.

Here you have a good point. The bankers spent too much of their time inventing ways to over-leverage and game regulation. The regulators allowed it. The gov't and the banks carried each other to the grave.

problem is, only the gov't is in the grave.
the banks are sitting in a nice duplex penthouse on CPW

Politicians seem to have not faired to badly in this either.

Matt, you do live in fantasyland. Do you think that all those no-doc, interest-only 5 year and 7 year reset loans were made to people to took them within their budgets?
The government should not be meddling in revising mortgage terms after the fact. This is what Obama wanted to do. It is insane. The long-term effects would be to increase risk and costs and reduce liquidity for the whole mortgage market in the future.
Obama's socialist tendencies are scary.

I partially agree with Rhino. But packaging loans in and of itself is not a bad thing. The overleveraging and the misstatement of the risks of the underlying loans were big problems.

The government keep building the dam higher and higher with the illusion that it can continue to control the flow indefinitely. At some point, the government cannot build the dam any higher and will lose control of the levees. The higher the dam, higher the flood water, the greater the chance that people will drown instead of just losing some of their material things.

Look, I'm no economist, that's for sure, but government intervention is going to make a terrible situation even more horrendous. People did not buy houses from the banks, they took out loans. The buyer bought the home, agreed to pay the price for the home no matter how absurd, they asked the bank for the money, the bank agreed to lend them the money. The bank doesn't want the home, they want the money. They do not really want to be in the business of getting rid of foreclosed homes. But the home is the only collateral for the loan, so it defaults to the bank. The bank made a lot of loans to borrowers both qualified and unqualified. In this economy both qualified borrowers and less stable borrowers have lost their incomes to pay back the loan. The bank has every right to try to recoup as much of their losses as possible by foreclosing on the home and trying to sell it at a loss. The bank is going to lose money on this deal as they should for not being diligent in their lending requirements. The buyer loses a house that they never really owned because they borrowed the money for it in the first place. They will also lose their credit rating so they may not be able to buy again easily. Where will these homeowners go? They will have to rent like they did before they bought, or live with relatives or friends, share homes and expenses. Some of you may say, how can they rent with a bad credit rating. Maybe that is where the government can help by overcoming those barriers, promote small business loans to get people working again. But propping up the market by keeping home prices artificially high will not help solve our economic problems. It is not going to create jobs that will help these unfortunate people to get back on their feet again. Shelter is a basic need, home ownership is not, just as we have learned that it is not the means to economic security.

Newbie, good comments, but I would add that one of the problems was that banks were not taking the losses simply by issuing bad loans. Once the loan is securitized, the risk shifts to the buyer of the securitized bond. This helped in making banks reckless in their lending standards. The credit rating agencies also were negligent in not rating the securitized bonds correctly, making them look like investment grade when they were really junk. Also, lots of banks got into trouble by keeping loads of the bonds themselves. Regardless, the bond investors have rights in pursuing the collateral on the underlying loans similar to your description above regarding banks seeking to minimize their losses.

The story is better than that. Investors own the first liens, the banks the second liens. Obama makes the investors take losses on the primary mortgage while the banks continue getting paid on the seconds.

"Where will these homeowners go? They will have to rent like they did before they bought, or live with relatives or friends, share homes and expenses. "

You must be 23 and still living with your parents.

If you've lost your INCOME, you can't rent.

And good luck if you're an entire family being kicked out of their home, looking to move in with "friends". Do YOU have room for a family of five in your hipster Williamsburg studio?

Listen Matt, I have compassion for people in this situation. I just think you are mixing up issues if you think banks are supposed to provide shelter indefinitely. My analogy is comparing someone already in a rental who loses their job and can't pay, vs. someone in an 'owned' house who can't pay. All these people should get some support (tough to say how much, big societal debate..)... but its is arbitrary for people who purchased to be in a better position than those who didn't.

I'm 36 and support a wife and child. I don't know what you are, nor do I care.

i like newbie's ideas. the devil is in the details. obviously if banks finally foreclose where appropriate(and there are quite a few owners who are TRYING to get their bank to foreclose, actually), they'll have to do something with that inventory. the pressing question is how do we prevent the rapidly escalating homelessness that would likely occur with another additional 7 million foreclosures occurring concurrently with record numbers of people being unemployed long term and the odds that many will run out of unemployment and health benefits?

at the end of the day forcing the market to clear prices is only for the good. it's the middle of the journey that troubles me.

Matt is just tired of providing shelter to his house guest indefinitely.

Matt, I have no sympathy for your house guest. If I remember correctly, given his age and income history, he should have saved enough to get through 'many' years of unemployment before ending up on your sofa.

Maybe the government has to take all the loans and the homes. You can't force a bank to let people live in homes, when they are not paying the bank and they have negative equity. Whether some of these purchases were prudent or not, the most prudent thing to do during the bubble was not to buy. There is something very perverse about trying to carry the whole real estate market on the govt's back at the expense of conservative renters who might otherwise get a good opportunity.

Sunday, so that is the story behind my getting Matt's pissy brunt? It was very strange how he brought Williamsburg hipsters into it.

Seems a lot of smart people arguing rent is cheaper. If that's so, the bank is doing the delinquent home owner a favor by foreclosing. Free shelter is not a service provided by lenders. We need to separate strategic defaulters, and those who bought too much house from the discussion. These two categories clearly can rent, and not having paid 8 or 12 months worth of payments should have provided some savings(there are plenty of companies out there who advise home owners how many months they can live rent free before being evicted).

It's also quite scary that someone can buy a home and leave yourself with no cushion in the event of unemployment. This is something fostered by a gov't who decides we need a safety net for everything.

We have a safety net for everything? How so? You're a fucking idiot.

the blame goes both ways, though, rhino. underwriting really isn't rocket science. put some numbers in a program and you can pretty much tell who might default. they didn't really care. and they would have been fine if those pesky kids (declining home values) hadn't meddled.

the homeowner wasn't forced to buy. the bank wasn't forced to loan. bottom line, the bank was in the business of loaning. and it's not forcing the banks, actually. most banks are no longer foreclosing with any great speed. they have way too much inventory. they'd much rather have the homeowner stay and pay the taxes. a vacant property in many areas is just asking for vandalism.

the question of fairness is sort of behind us. it wasn't fair, it isn't fair, it won't be fair. was it fair when the gov't encouraged (maybe enabled is a better term) the bubble and so many people were priced out or bought more than they could afford? no. prices will fall. it's just the slope of the fall that's questionable.

Which direction of blame are you suggesting that I am denying?

I had a similar conversation with a woman from Spain recently. She was mocking our healthcare debate, noted that in Spain "Everyone is covered" and said proudly "I'm a socialist!". I said, "Yes, you are all covered for everything, but you have 19% unemployment and may have a worse crisis then Greece. You may even have to abandon the Euro so you can devalue your currency and pay off all the debt you've generated. Either that, or your children will essentially be slaves for a generation or two, with a VERY low standard of living to pay off the debt your generation has incurred." She just shrugged; couldn't care less.

Democracy is not sustainable; some people can't manage their own checkbooks, let alone the country.

Banks are the party that brought the system to its knees by fudging
capital requirements and using wild leverage... They were the most
informed party on matters of finance. I hold them more accountable
that a government encouraging lending to the less qualified.

Seems a lot of American Socialists have been arguing how backward we are and we need to be more like Europe(Greece, Spain, Ireland, Italy?). They may be beautiful countries, but they are also an economic mess, even when compared to the U.S.

there's plenty of blame to go around. there really is. but WHAT do we do? and what reprecussions will there be when we do it? it's easy to say what shouldn't be done, and i do that all the time. but it seems we lost our opportunity for real reform when paulson shoved tarp down our throats rather than any other mechanism for dealing with the banking system. and now we just give free money to them to ensure that they can afford the losses coming down the road.

If its socialist to have everyone covered in terms of health care, and to level out the public school system then bring it on. Your American vision is really only the Reagan/Bush era. The right have re-written American history. There was nothing approximating the GOP before the 1970s, arguably later.

What you don't understand is all societies will eventually pay a
price for leaving the middle and bottom behind. Even the greedy
fucks at the top of the food chain should realize you'd rather have
a strong educated middle class to leverage in business and sell
products to.

the greedy fucks at the top are looking forward to selling to india and china, etc. they just take the profits, they don't care (although in the long run they really, really should) where things are made or sold.

"Maybe the government has to take all the loans and the homes."

And where do all those people go?

Are you suggesting we just turn Central Park into a Tent City?

"What you don't understand is all societies will eventually pay a
price for leaving the middle and bottom behind. Even the greedy
fucks at the top of the food chain should realize you'd rather have
a strong educated middle class to leverage in business and sell
products to."

Precisely.

Unfortunately, our nation is on the fast track to turning into Mexico, where you have the uber-rich forced to live behind locked iron gates and electrified fences, with everybody else living in squalor in houses made out of old tires.

No I am suggesting that they stay there under government auspices. I just dont think you can force a bank to run a welfare state. You can however, suggest that the government should. And perhaps the government should move people around a bit and perhaps open some of this shelter to renters of like financial circumstances.

"And perhaps the government should move people around a bit and perhaps open some of this shelter to renters of like financial circumstances."

So you're suggesting that the government confiscate unemployed peoples' apartments and force them to double or triple up with other distressed people?

Its not really as trite as all the political bickering. Its really
a deep argument about what kind of society we want to be. For
starters, health care costs are crippling. For seconds, if all
men are created equal, one public school shouldn't be like Rikers,
while another is like Exeter.

I thought we were talking about houses, not apartments. In any
event, I don't think underwater buyers are inherently entitled to
more (indirect) government support than renters. Haven't we done
enough to discourage savings and encourage borrowing.

"while another is like Exeter."

You mean like with students having affairs with their teachers and killing their teachers' husbands?

"I thought we were talking about houses"

So if it's a HOUSE, you think government should confiscate it and force the unemployed owners who can no longer afford their mortgages to take in other families in similar dire straits?

I just mean if you want to call basic education and basic healthcare
for all your citizens, socialist, then call me a socialist. If not
giving a shit that many Americans get neither is capitalist, then go
fuck yourself. The proverbial you.

I'm tired of defending my opinion Matt. It may be time for you to
make an argument why an underwater "owner" deserves more support
from the government and/or Citigroup then does a renter. If you
have no equity, and you cant make the payments...then its not your
house...its the banks house. Its no different then a renter being
thrown out by a landlord and should be subject to the same mechanics.

Rhino. But in his defense, he's our town idiot.

I think if anything he illustrates the deeply ingrained American idea that owners are superior. This is ironic given his apparently liberal bent. It seems simply enough to me that if you have no equity then you are essentially renting from the bank. There really was no such thing back in the day because (1) you needed to have a down payment and (2) prices didn't rise 300% and then fall 50% inside of 15 years.

Banks are the party that brought the system to its knees by fudging
capital requirements and using wild leverage

Agreed. They were in cahoots with thieves like Countrywide who blanketed poor, minority neighborhoods (through the US Post office) with promises of cheap home ownership. If savvy, wealthy investors were taken in by Madoff and his ilk through dreams of riches, imagine how easy it would be to hoodwink near illiterate immigrants and the working poor. They may not be able to hold on to their homes but it is sinful that the Govt. has not sought clawbacks and prosecution for many companies and wall street firms that engaged in deceit and fraud. With govt, help, BOA bought up all those Countrywide loans, will dump the bad ones and profit enormously from the deceit. All profit gained though fraud should go into social services. The govt sure seems focussed on getting back every penny for the mostly wealthy Maddoff victims but they have done nothing to get restitution from Countrywide's fraudulent practices. They haven't even investigated. The banks knew exactly how those loans were gathered and securitized. They looked the other way because the profits were huge and they were happy to feed the monster.

"savvy, wealthy investors were taken in by Madoff and his ilk through dreams of riches, imagine how easy it would be to hoodwink near illiterate immigrants and the working poor"

If regulars on this board refuse to acknowledge basic rent/buy analysis to
inform their purchase decisions...

Perhaps Obama should pick more realistic goals. Instead of banning foreclosure, he should ban poverty.

apt23, this may interest you.

http://www.ritholtz.com/blog/2010/02/here-come-the-put-backs/

"Such mortgages were riddled, not infrequently, with the connivance or encouragement of the lenders — says Mark Hanson, the insightful real-estate analyst who runs the eponymous Hanson Advisors — with fraud, white lies and like nasty stuff that violate the loan warranties. Investors, he relates, are only beginning to seize on such breaches to demand so-called put-backs — repurchases of principal, accrued interest and expenses for loans that have been compromised.

Mark warns that as more investors turn to put-backs to recoup losses, this process will begin to take a toll on financial institutions that were active in the mortgage and housing arena. He points out that because the put-back push is in its infancy, there is no way for financial institutions to estimate future losses or need to recognize the potential costs under current accounting requirements. All of which is apt to make losses that much more painful for those institutions."

You cannot con an honest man.

LOL, You don't know who Mark Hanson is.

It is true, many people bought houses that they could not afford, often bought with very little of their own money down. It was not their money that bought the homes, it was the bank's money. And it was the bank's fault that they lent money to unqualified buyers, and for this the banks should take the loss. But if we all start thinking that it is ok to borrow money and then not pay it back, who will lend money in the future? And will it have to be a rates so high as to cover the defaults of all those who decide not to pay back or can no longer pay back their loans. I think these "average joes" did realize that they had to pay the money back on the homes they bought. I think they honestly had every intention, but they did not count on losing their jobs, nor did they understand how big a balloon mortgage could get in 5 or 7 years. The truth is, they could not afford the house that they were buying. And subsidizing housing prices at a level that average people can not afford does not help solve the real estate economic woes. Government should stay out of the marketplace and let it right itself. Government will screw things up worse.

"The right have re-written American history. There was nothing approximating the GOP before the 1970s, arguably later. "

LOL, Rhino. Ever heard of Barry Goldwater? How about Calvin Coolidge? How about the founding fathers, who expressly prohibited the federal government from taxing the people of the United States. John Webster said "The power to tax is the power to destroy". Chief Justice John Marshall said something similar. I think all of these folks go back before the 1970's, I dunno I'll check...

"The truth is, they could not afford the house that they were buying."

Most of them COULD, as long as they didn't lose their jobs.

NYRENewbie. The conclusion is obvious to your question. Lenders will require more money down, which is not an all-together bad thing. The victim/borrowers who put no money down, it reminds me of some David Mamet films.

RS, good try. that quote is from Barron's. he contributes to The Big Picture, which i generally find very credible. here are his recent contributions to the business insider. do you have any real informaton about hanson or his thoughts?

http://www.businessinsider.com/mark-hanson

Most of them COULD, as long as they didn't lose their jobs.

Disagree, many of the loans had debt to service ratios which were not sustainable.

rs, you're so simplistic it hurts.

he contributes to The Big Picture,

Nice try
means you don't know.

Riversider is correct. In addition, if you can't handle the possibility of some distress, you can't afford your house! EVERYONE loses a job or has a down year at SOME point in a 30 yr mortgage...you need to be able to meet your mortgage payment in good times AND BAD. That means having a cash cushion to draw on. But most of these folks didn't even have enough cash for a proper down payment, let alone a cushion in case they get sick or lose their job.

RS, you sly little turd. then share. i was referencing a Barron's article. if you mean to imply that barron's is quoting a questionable source, then prove it.

The turd says fuck off and sit on your toilet. Just found the source you were quoting ironic. It'll be our private joke.

RS: Instead of banning foreclosure, he should ban poverty.

Really? You think it is just fine for corporations to target the poor and disadvantages with fraudulent practices? You must be of the opinion that corporations selling tainted baby formula to third world countries was just fine too-- plus it makes our american aide dollars go further among the diminishing populations.

RS:You cannot con an honest man.

Really? Are you saying there was not one honest man who lost his money to Madoff or the other dozen hedge fund frauds the govt has uncovered.

Newbie: Government should stay out of the marketplace and let it right itself.

The reason we are in this mess is because govt did away with regulation. If regulation is not re-instated, this particular history of run away greed will repeat itself. To think otherwise is naive.

I think there's widespread misunderstanding about what "the bank's money" means. When a homeowner took out a 90% loan, it provided 10% of the capital and the bank truly provided the other 90%. In reality, the bank is only putting up 10% and the remaining 80% is actually depositor money: i.e., yours and mine. That money enjoys various implicit and explicit government guarantees: e.g., FDIC. In the end, the taxpayer is on the hook for systemically large losses. Even for a large fraction of large loans, the taxpayer is on the hook through Freddie / Fannie. For the repackaged jumbo market, a lot of this is actually pensions and state & local governments, again taxpayers on the hook.

Buffering the housing market and letting banks and homeowners "earn" their way out of their losses puts the losses squarely with those who took the risk. Having it drop off a cliff puts it on taxpayers / renters. I know this means that a renter who is a "natural buyer" would have to take the loss if they step in and buy now, but you don't have to be w67th's proverbial lemming.

thanks for the clarification. really, thanks.

apt23. I think it's naive.
The gov't does need to take steps, but I believe those steps are to be to ensure laws are enforced, contract terms are laid out in plain english, and that companies don't get so big as that they get to dictate the terms. What I don't believe is that handing out tax payer money really fixes anything.