Here is how the bailout will play out and bail out home mortgage holders

 1. Anyone who has bought or refinanced since, oh, 2003 or so, has a mortgage (or a second mortgage) that is underwater.

2. By how much? I would say an average of 40% when you throw in costs of loss mitigation: servicing and resolving delinquencies, short sales, foreclosures, etc.

3. The FHA "Hope" measure took effect yesterday. A lender writes off its loan to 90% of today's appraised value. They get a newly minted fixed loan guaranteed by the FHA. The homeowner stays in the house with a lower payment.

4. This is the model of the future. The Hope program is voluntary. In the near future there will be a forced program.

5. All lenders will be forced to write down principal and will receive a new US government guaranteed loan. There will be no choice in the matter if the homeowner applies and qualifies.

6. Meanwhile, the US government will have purchased much of this paper anyway, so the losses will NOT be borne by foreign investors. That is the key to the whole bailout:

• avoid price discovery, and
• bail out foreign investors

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warmly, 

 

 

P.S. The opportunity here is to put the bad news to work for you. The news can motivate people around you to let you buy their house, or work out a loan mod for them. There has never been a better time to try out my material for a full 365 days. At the old price (at least as of the time of this writing…the price may have gone up when you read this.)

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