Ideas for the housing market: What’s the best way to swallow some bad medicine?
Roubini has been right on this thing from the very beginning. I think that warrants our attention.
Here’s a blurb from his 10/8 oped in Forbes.
“The flawed $700 billion Troubled Asset Relief Program (TARP) legislation will have to be modified in three ways to: a) allow for direct government injection of public capital in banks in the form of preferred shares, matched by private capital contributions by current shareholders (via suspension of all dividend payments and matching Tier 1 capital provided by private shareholders); b) implement a clear plan to reduce the face value of mortgages for distressed homeowners and avoid a tsunami of foreclosures; c) do a rapid and radical triage between solvent banks and insolvent banks that need to be rapidly closed.”Here’s my thought for how to address Part B. Parts A & C are beyond my paygrade.
The fed govt steps in and takes over foreclosed homes from buyers/lenders. It spends $200B guaranteeing no more than 50%payment of current loan/local taxes. The lenders can take it or leave it. If the property is abandoned and decrepit seizures and salvage/bulldozing commence.
The other $100B is for property maintenance/upkeep/management.The fed maintains property and rents properties at market value using local construction/property management firms.Any profits from rents after payments/maintenance is banked in general fund and redistributed yearly to taxpayers.
Property is held until RE values stabilize/recover. It will take 5-10 years I’m guessing.Than it is resold with original lienholder getting first option.
Does it expand govt?Yes, of course. But it’s a bit late for that concern don’t you agree?
This could provide a speedy resolution which is critical.Oversight, Simplicity and transparency are key I believe.I think it could raise the potential bottom of RE values substantially if implemented correctly.
What are your thoughts??
I’m no economist or RE expert. I’m just a taxpayer tired of getting the dirty end of the stick.So if I’m way off base here please let me know….but no need for nastiness. We’re all in this hole together.
Thanks much.Have a nice weekend.