Bush Administration Closer To Mortgage Relief

Dec 1st, 2007 @ 2:53 PM by Alden Smith

As reported earlier, the Bush administration is pushing Hope Now, an alliance to help people facing foreclosure, to be finalized.  The administration is moving quickly on this, and on Monday, Treasury Secretary Henry Paulson will deliver the outlines of the plan to a national housing conference.

Talks on this subject have involved the big players – Citigroup Inc., Wells Fargo & Co. and Countrywide Financial Corp. What they wish to see is to extend for a number of years the lower, introductory rates that were offered on sub prime mortgages, loans.  These are typically offered to those with less than perfect credit.

Two million of these mortgages are going to reset by next year. Hundreds of thousands of d0ollars are expected to be lost if a deal cannot be worked out with the top lenders. This effectively dumps more unsold homes on a market that is already glutted with too many houses to sell.  And this, along with a loss in consumer confidence, is enough to push us into a full blown recession.  The outlook is bleak at the very least.

Concerns by investors are the return of investment on the packaged secured loans they have poured money into.  They stand to lose short term, but it is considerably more desirable to have some return than none at all if homes go into default.  Critics worry that lawsuits will be brought against companies that are modifying mortgages that aren’t in the best interest of investors.  To my way of thinking, some return is much better than none at all.  Greed, of course, will drive this.

The good side of this action is that no government or tax payer’s funds will be used in the process.  President Bush has made this clear from the onset. The whole thing will be on the backs of the banks and investors who have placed their dollars in shaky investments.  One has to think that if you are gambling on a security that is supported by people with poor credit, then the gamble is yours, not the government or the lending institutions.  I am sure many investors would disagree with that, but it is the nature of the market.  You pay your dime, you take your chances.