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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
QED
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
QED