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12 Votes
5 Comments
Bernanke Speech on Subprime
News Type: Event — Seeded on Tue Mar 4, 2008 9:37 AM EST
Article Source: Federal Reserveadvertisement
Bernanke is putting the write down solution on the table. He is telling banks and investors to consider writing down the principal of the loan because it would reduce foreclosures and borrowers may actually stay in their homes and pay. This may result in lower losses than trying to restructure interest rates because if people owe more than the house is worth they walk away even if the interest rate is reduced. This is one way to begin de-leveraging!
If you haven't yet, it's time to stop paying your mortgage:-)
(I am not serious - but it shows one moral hazard attached to all of these proposals).
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9.7
{"commentId":1538319,"authorDomain":"polecolaw"}
This is the next step - a call for investors to step up and be proactive. If they don't reduce principal they will lose more because more homeowners will walk away from their mortgages rather than accepting a restructure since they will still owe more than the home is worth. The cost of foreclosure and the proceeds from auction result in losses of about 50%, so if they write down the principal and the homeowner pays they will lose less.
{"commentId":1538319,"threadId":"229029","contentId":"1342580","authorDomain":"polecolaw"}
- 4 votes
#1 - Tue Mar 4, 2008 9:41 AM EST{"commentId":1538865,"authorDomain":"SVForbes"}
The cost of foreclosure and the proceeds from auction result in losses of about 50%, so if they write down the principal and the homeowner pays they will lose less.
That seems sensible.
{"commentId":1538865,"threadId":"229029","contentId":"1342580","authorDomain":"SVForbes"}
- 3 votes
#2 - Tue Mar 4, 2008 11:48 AM EST{"commentId":1538970,"authorDomain":"polecolaw"}
It solves the problem of people walking away from their mortgages. My concern is that individual investors will not get this together and the federal government will step in and refinance hundreds of billions in mortgages. Then it becomes a taxpayer problem.
{"commentId":1538970,"threadId":"229029","contentId":"1342580","authorDomain":"polecolaw"}
- 5 votes
{"commentId":1540276,"authorDomain":"SVForbes"}
My concern is that individual investors will not get this together and the federal government will step in and refinance hundreds of billions in mortgages. Then it becomes a taxpayer problem.
That's my concern, too.
{"commentId":1540276,"threadId":"229029","contentId":"1342580","authorDomain":"SVForbes"}
- 3 votes
{"commentId":1541173,"authorDomain":"appleannie"}
The government cannot even get a rebate together and out the door.
I have no confidence that this intelligent step will ever be considered, much less taken.
{"commentId":1541173,"threadId":"229029","contentId":"1342580","authorDomain":"appleannie"}
- 3 votes
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