An excerpt from Peter G. Miller's recent RealtyTrac article:
Figures developed by Rick Sharga, senior vice president of marketing with RealtyTrac, show that the likely cost of low interest loans would be roughly $220 billion - hardly cheap, but a lot less expensive than the $700 billion plan now being discussed in Washington.
Sharga's figures look like this:
Some 2.5 million homes are likely to be in the "process of foreclosure" during the coming 12 to 18 months. If a typical home has an average sale price of about $220,000 (many homes now facing foreclosure were financed several years ago with two loans, thus first loans are often significantly less than current market values), and if the average mortgage is $176,000 (80 percent of market values) then the total value of such mortgages would be $440 billion. If the refinancing program was limited to half of the homeowners who will probably lose their homes to foreclosure, Uncle Sam would need to provide loans worth $220 billion.
The full text of which can be found here; a better bailout?
Now, I've been wondering for quite awhile why US banks have not been more aggressively rewriting mortgages. Let's say you've got a home owner about to face foreclosure because their balloon payment has put their mortgage payment out of their reach. As a bank, at this point in time, do you want to take that house over and have it sit empty until the market corrects to some fraction of it's current value? Would you like to rent it out and make a few points - because that's about what you'll make renting out a half million dollar home for 2K per month after property taxes, the occasional empty month and property taxes (don't get me started on the cost to fix a rental if you aren't doing it yourself). Is that really what you want to do? Why not, in every nearly reasonable situation keep a tenant who is motivated to keep the place up and who is going to not cost you foreclosure fees and a six month repo. waiting period... Why not rewrite some of these loans instead of waiting for a tax payer based bailout.
Why the hell not?
L
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