Wikinvest Wire

Housing quote of the day

Tuesday, March 09, 2010

From a story by Diana Olick at CNBC late yesterday on the possibility of the federal government getting behind a large-scale program to reduce principal balances on underwater mortgages comes a keen observation from housing consultant Howard Glaser.

Home prices have fallen so far in the hardest hit areas, the areas where the bulk of the troubled loans are, that banks would have to write down principal 30 to 50 percent to put borrowers back in the green. Accounting rules require that banks write down the value of those loans on their books, and experts tell me that if banks really accounted for all the losses in the home loan market, they'd all be insolvent.

That's why the Obama Administration has created this kind of shell game in the first place.

I stole that shell game idea from housing consultant Howard Glaser: "We're spending tens of billions of dollars on a tax credit to get people to purchase homes, we're spending federal money to keep them in their homes through the modification program, and now we're going to pay them to move out of their homes. This is not a sustainable system for the housing market. It's a shell game. Bernie Madoff could have created this system," Glaser told me today.
Mr. Glaser does a good job with that summation and one important tidbit that dovetails nicely with the tax credits, loan modifications, assisted short-sales, and possible principal reduction is the fact that the U.S. government, via wards of the state Fannie Mae and Freddie Mac, basically own the entire mortgage market.

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Anonymous said...

Well this boom-bust corporatism is going to continue unless someone steps up...

Join me in supporting Rand Paul for Senate on March 23rd as part of a "Give Me Liberty" online moneybomb effort @

His opponent is from a banking family and has industry hack written all over him...and the checks he cashes for his fund-raising.

Anonymous said...

The banks that made these stupid loans are serving no useful national purpose. Stop propping them up so that banks using sensible business strategies can start up to take their place. Propping up zombie banks that follow useless business strategies is the mistake Japan made.

The taxpayer is currently making all new mortgage loans anyway, with the zombie banks leeching off the taxpayer guarantees. Just let Fannie/Freddie make loans directly until new private banks start up. That way, the taxpayer can at least limit his risk by choosing the loans.

Immediately stop the Fed from buying these mortgages, since this creates a fantastic future risk of ripping off consumers with hyper inflation. The risk is unlimited with the printing press. The entire Baby Boom could lose their life savings to the mad printers, and economies have historically done very badly during hyper inflation. We could even lose our freedom during hyper inflation, the way the Germans did when Weimar printed. Hyper inflation is something to be avoided.

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