The house vote has come in - the answer NO.
Is it back to the drawing board to rework the bailout plan?
Is it a total rejection of this type of solution? Let the market sort out the troubles?
Main street evidently won the vote by overwhelming the representatives with their anger over the bill.
Not even sure that Wall Street wanted the bailout.
With the President, the Treasury Department, the Federal Reserve, the Speaker, the Chairman of the House Financial Services, both Presidential candidates and many others telling the world that this is necessary or else, what happens now?
There are many economists that are against the bailout. Here is one I heard yesterday on NPR.
Update: Not sure what will change, but apparently the House will attempt a revote later this week. Either the bill will be modified or there will be some arm twisting.
Here is a summary of the bill and the full bill.
Here is a section by section.
In the bill there is specific language about loan modifications, which to me makes the proposal (Troubled Asset Relief Program TARP) something that may provide a solution.
For mortgages and mortgage-backed securities acquired through TARP, the Secretary
must implement a plan to mitigate foreclosures and to encourage servicers of mortgages
to modify loans through Hope for Homeowners and other programs. Allows the
Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires
the Secretary to coordinate with other federal entities that hold troubled assets in order to
identify opportunities to modify loans, considering net present value to the taxpayer.
I would like to see more details about modifications, to have confidence that the program can work. Relying on Hope for Homeowners does not give me hope.
UPDATE 9/30
SEC is providing guidance about asset valuation that may address one of the concerns that is keeping some legislators from supporting the rescue plan. This might be enough of a change to allow relunctant representatives to change their vote with justification and without appearing to have caved in to the leadership.
Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
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Interesting, very interesting. I "think" the House is right or maybe I just "feel" the House is right. Is there a right answer?
Thanks for the update.
Richard I think a part of me wants the bail out and other part of me does not want it. Maybe the Banks will not give out money to anyone but something needs to be done. i guess we will wait and see.
Fred,
The question for me is how will we deal with the foreclosures - that is the cause for the credit crisis?
Tell me how the bailout will help foreclosures, and it can help. But before we spend $700 billion those details should be workout, at least to some degree.
Richard
HI RICHARD!
Well, what's your expert opinion? What do you make of this mess? You always have well-versed mortgage minutes. How do you think they can fix the mortgage problem...forget about those big companies?!
Best.
Richard.. there is both good and bad in this situation... I just don't want the tax payers to fot the bill.. If approved.. the government could profit from this as well...
I'm still on the fence post on this one
I don't want the bag of dung on my step for sure. But I do think there is something we can do for the people. THE PEOPLE. Like me. I could use some help sometimes. The only help that I can trust in is the LORD. Thanks for the update. NAR said that they are not letting it go. So we will see. I sure there will be a revised version of it.
Yvette,
I have no expertise to provide a reliable solution. My hope is that they find a way to address the root causes which are housing delinquency, leading to foreclosure, housing devaluation, and high inventory.
The only way to improve the housing fundamentals is to modify loans so that people can make payments. Hopefully the other issues will sort themselves out in the market place.
We also could use more buyers - DPA, a reasonable subprime and Alt A market, and a restoration of 100% lending.
We cannot sell off the inventory with a reduced pool of qualified buyers.
I have updated the post with news about SEC guidance on valuing the bad mortgage assets, a major stumbling block for many legislators.
Thanks,
Richard
Considering Paulson's Goldman Sachs background, I was surprised to see the Feds didn't come up with something that pleased Wall Street. Some would say he still works there. The other matter is the "mark to market" writedowns that are causing huge losses without a default.
Rick,
The credit markets are a problem, as are the European banks with their new struggles from money market fears causing something of a run on assets.
I still think the focus needs to be on stabilizing the mortgage securities by modifying struggling loans in the portfolios. I understand that investors on the upper end of the cashflow waterfall may not support the modifications.
But I think modifications are essential to correcting the fundamental issues in the mortgage market, hence in the credit markets.
Richard
Well, it seems as if the government is still active on a case by case basis and maybe htis is best. The reality is that there is no science behind the $700,000,000,000 number, it was pretty much just picked out of thin air. I think that, currently, there is still involvement in each individual case and, therefore, there is scrutiny every time money is spent. I like that.
Regarding loans that go into foreclosure, why doesn't the PMI insurance cover the loss? And where does that premium go to and who underwrites it?
Henry F. Stockman
henry@stockmaninsurance.com
Henry,
Thanks for stopping by my blog. This is an excellent question, and one that warrants a separate post, which I will try to do over the next day or so. Basically though mortgage insurance will cover a portion of loss on the principal from a foreclosure loss.
The losses that the market is sustaining is buying back loans and securities that were purchased based on an income stream. MI does not pay this loss.
Richard