patrick.net

Most of what the government does is to benefit one class over another... or more prcisely, at the expense of another.

Illegal? No. How could it be? Congress is passing the Law. Law = legal. You might not like this law, but it doesn't appear to violate the Constitution. We have no more right to sue than when Treasury and stock market players get hurt by Fed manipulation of interest rates.

This is just more Big Government, socialistic financial gymnastics--cooked up by Big Boomer--that, as usual, will ultimately punish the responsible and reward the derelict.

To think we fought a cold and hot war against communism for 50+ years, even claiming victory--cira the late '80s--only to throw in the towel as the Boomer Woodstock generation comes into its full inheritance and drives a stake through the heart of the free market, hurling it (and the middle class)into the graveyard of history.

Un-fricken' believable...

WTF?

No, and don't worry, I get the impression almost everyone agrees that there is not going to be a significant impact on anything from what is mostly political posturing. No slowdown in the housing bust.

Yes, I do expect that the bailout will have no long-term impact. Lenders will be exactly that much more reluctant to lend, because they now have to contend with the government pressuring them to retroactively modify loan terms. Makes it less certain that they will get their money, and uncertainty = higher interest rates = lower house prices.

That's one of those wonderful fundamentals you've pointed out from the start.

There will be no impact on the housing market.

The main impacts are:

1) You and I the dumb tax payers will have to shell out $$$ through some newly erected GSE or Superfunds to bail out the Wall Street bankers who are stuck with the toxic waste, at a tentatively inflated bond price.

2) USD bond category as a whole is DEAD in the eyes of foreign investors. Forget about future inflow of capital. Nobody will buy USD bonds of any sort.

3) No ARM available for new home buyers. Where do you find fools who are willing to invest in an instrument that can be manipulated by the govt any time at the cost of investors? We are running out of fools. ARM as a category, particularly for non-conforming jumbo category, will be game over.

4) USD down the toilet.

Invest wisely, protect your earnings and savings.

Bap33 Says:
the Fed aint constitutional is it? And the forced wealth re-distribution tool called the IRS aint either is it? Just askin

no, they're not. nor are councils or state govts. this means you don't have to pay any taxes or parking or speeding fines, for instance, because they are non-Constitutional. Go ahead, try it, refuse to pay any fines or taxes on legal grounds, you will win every case, and the state prosecutors will be snivelling and cowering in the corner by the time we have demolished their pathetic, illegal, non-Constitution referencing arguments...

* disclaimer to the foregoing drivel: not legal advice. not real legal advice anyhow. just a joke. for entertainment purposes only. *

I invite comment/criticism on the following that I put together for another audience:

There is quite a bit of drama over this plan from both sides of the fence, mostly for no reason. I would like to explain why most of this publicity is undeserved. In theory, it is a pretty good win/win plan, but before we begin to understand it, we need to dispel a few misconceptions.

First, the idea that this is a Government "Bailout" plan, is utterly false. There are no taxpayer funds going towards this action.

Second, this is not an answer for all ARM holders. It will only affect a percentage of Sub-prime ARM homeowners. According to the Bush Administration, that would be 60% of Sub-prime homeowners. According to knowledgeable private sources, it would be closer to 6-12%, (Possibly less). Next keep in mind that the Sub-prime ARM homeowners are only a percentage of the total of ARM homeowners, including Prime, Sub-prime and Alt-A (in between the two). To put this into perspective, about 25% of all mortgages in 2006 were Prime and Alt-A ARMs. Only about 10% were Sub-prime ARMs.
http://findarticles.com/p/articles/mi_qa3631/is_200708/ai_n19433910
(If you have been wondering why Those-in-the-know either chuckle or cringe when the media talks about the "Sub-prime Crisis", it is because Sub-prime is only the tip of the iceberg). Still, this is still better than the approximate 1% of all ARM mortgages that have been successfully restructured in the past year.

Third, ARM homeowners with 0-3% "teaser" rates will be given another 5 years at their current rates, (or let off the hook completely). In fact, the vast majority of these low rates were made to non-Sub-prime homeowners who were re-financing their homes to pay off credit cards or to buy extravagant luxuries, (I will leave it up to the imagination on how many refinanced to pay down debt). As I have pointed out, these people will not be covered because they are not Sub-prime.

The reason why this plan will work is simple: it is based upon greed, (or good financial sense, whichever term you prefer). Most of the people that will be eligible under this plan are people who have been able to keep up with their mortgage payments at rates that are at or above what Prime fixed rates were for the same time period. One could argue that maybe these people should not have been included in the Sub-prime class to begin with? In truth, there were a number of families that were duped into Sub-prime because the Mortgage Brokers were payed a premium for signing people up under this class of mortgage.

The final piece of the puzzle is that the end investment holders will only return pennies on the dollar for foreclosed homes, due to the current U.S. housing situation. However, by utilizing this plan they will have returns worth the same as standard conventional mortgages for the next 5 years. Of course, after 5 years, the investors have the option of renewing the plan or raising interest rates. The decision will be simple, if housing prices have gone back up in 5 years, they will raise rates and sell foreclosed houses at a profit. On the other hand, if homeowners have been making their payments on time and prices go up, then they can then opt to sell or to refinance to a Prime Fixed-rate Mortgage.

Just wondering - Do folks with Jumbo loans qualify for this welfare? If they do not, then I do not think this is going to impact CA at all.

Have to say... This method of operation didn't surprise me:

http://patrick.net/wp/?p=204

Look for this post:

smb_gaiden Says:

April 14th, 2006 at 12:40 pm

--------
And also look for the replies. My thoughts on this in the present day follow.

However, the reply to me at the time was that it will not sit well with the bond holders. Seems the politicos statements now are confirming it. The empty promise coupled with lacking binding laws it would seem that the reply at the time is right. Lenders will not wholesale bail out and there is no fed money on the table to make up for the interest freeze opportunity cost for the note holders.

J Galt :

First, the idea that this is a Government “Bailout” plan, is utterly false. There are no taxpayer funds going towards this action.

That statement is most likely accurate. I have also not seen any Govt body that will oversee the NO HOPE &#153 effort. So at this moment, there does not seem to be any significant wastage of tax dollars.

OO :

1. There is no tax payer's money involved in current plan. eventually, Govt (if not this, then the next) will try to use tax revenue for some bailout, but this is not the case for this plan.

2. USD bonds spreads over treasury have been increasing. But I am very surprised that mortgage rates have not gone up for 30yr FRM. I don't "get" the bond market at all. Why are they not worried about the principal ?

The only reason seems to be that there is enough money to be invested - like pension funds. These probably have no choice - either by their charter or because desperate need for yield. If they don't invest in bonds or if stock market stays doesn't rise, they will be in trouble anyways.

I personally have stayed away from US bonds altogether - except some CA muni fund that I have for tax free income.

3. I think I agree here with you. This process is already happening. The ARM rates are almost at parity with FRM. But the Jumbo category will be much deeper trouble.

4. The USD will be in trouble because Fed has no choice but to reduce rates. Treasuries are still viewed as safe heaven in these trouble times, and that has kept their yields low - which in turn acts as another reason for USD to trade lower.

I expect Fed to cut rates sharply. I wouldn't be surprised to see 50bp this time, or even more wouldn't shock me. The economy is in trouble and the only possibility for the trouble is to grow. So screw the USD, go Japan route and get to ZIRP as quickly as possible.

Reducing rates also help banks and lenders who borrow short and lend long. Mortgage rates stay same, FF rates go down and effectively the spread is increased. So that helps friends for Fed.

Stuck,

there is no tax payer money involved, so far. But, what happens when the frozen bonds get dumped? Tax payers will be the ultimate bag holders, that's always the case. This is just the first step, when the current bag holders (mostly funds and banks) start to dump their holdings as the credit market "apparently" loosens up, there has to be another willing party to take over the toxic holdings. Counting all the foreigners out, what is left will only be the US tax payers. That is my prediction.

I am equally perplexed by the 30-yr FRM rate not shooting up faster. I don't want to resort to conspiracy theory, but I am certain there is a visible hand somewhere doing some kind of dirty work. It is just too odd.

JGalt said:
if housing prices have gone back up in 5 years, they will raise rates and sell foreclosed houses at a profit. On the other hand, if homeowners have been making their payments on time and prices go up, then they can then opt to sell or to refinance to a Prime Fixed-rate Mortgage.

Both your exit strategies count on prices going up. What if housing prices don't go up? Or is Paulson going to come up with another way to make sure _that_ never happens?

Besides, I keep hearing "this is not taxpayer funded" a lot without explicit guarantees that the crap won't be palmed off on FHA/FNMA or local government bonds. The statement about "not taxpayer funded" is beginning to sound like a Goebbelsian truth.

From J Galt

"First, the idea that this is a Government “Bailout” plan, is utterly false. There are no taxpayer funds going towards this action."

As some have pointed out, the taxpayers will be holding the bag. It's only a matter of time.

"In truth, there were a number of families that were duped into Sub-prime because the Mortgage Brokers were payed a premium for signing people up under this class of mortgage."

Duped? if by duped, you mean they failed to do due diligence, then yes these people were duped. No one forced these people to gamble with risky loans, and as far as I know they had the capacity to contract.

This looks a school project, and it looks like you're arguing for the plan. I'm not sure my comments will be helpful, but good luck with your report.

"Potential buyers face higher prices for a house than they would if the market were just allowed to work. This is a direct harm to millions of people, especially young families with limited income.

Is it illegal for the government to manipulate markets to benefit one class over another?"

Case and Controvery (standing)

At least in federal courts, and possibly state courts, there must be a case and controversy, (for fed courts, see Art. III). Meaning that the plaintiff has suffered an injury in fact, caused by the government, that is capable of judicial resolution. Further, the case must be RIPE, (the plaintiff has been harmed or there is an immediate impact of harm). This is part of the limitations for going forward with a case in federal court, and most likely limitation for state courts as well.

Since the Buyer is only a POTENTIAL buyer, there really hasn't been any direct harm, and the case is not ripe for review. In other words, the plaintiff only has a potential interest, not an existing interest in which the court can render a judicial resolution (remedy).

I haven't looked at Constitutional law in a while, but I think this would be the first hurdle to overcome when looking at the facts above.

I am being far too lazy to actually read the text of the bailout plan. But I have heard it summarized as merely a set of guidelines which entitites can voluntarily follow to freeze interest rates. It is stated as being in their interest as it will prevent dumping too many properties on the market which has the effect of excaerbating the problem.
As long as this is only voluntary I suspect we will have to see MBS owners having to send paper to their owners explaining why it is a good idea and then getting their permission.
As long as its voluntary there is no way anyone can sue.
In fact, as long as its voluntary there is no way the Supreme Court can step in and rule on its constitionality.

If these guidelines are law, look for Judge Roberts to slap this down.

J Galt you make many good points except that this is absolutely a government bailout. Bush's plan will become a tax burden on the US. It might appear through Fannie and Freddie or in a huge increase in the deficit or a larger trade imbalance. My thinking is that it will appear as an additional tax on my savings by the federal reserve in the form of inflation. I give the example of Japan in the 80's. There was a real estate bubble that was not allowed to burst. Now the Japanese government is carrying a huge government debt from the indirect bailout of the Japanese banks.

For the record, I am neither for, nor against the plan, as I am not a homeowner, nor do I think that this will contribute to "Stickiness" in any appreciable manner. It applies to far too few people to have any sort of bearing on the housing market as a whole. My sole purpose is to get people to understand exactly what is going on, so that we can "get over it" and remain vigilant that they do not pass some new "plan" that would include FHA/Fannie/Freddie bailout money coming out of my pocket. In other words, my opinion of this plan ranges from window dressing by the administration to show that they are taking action to a diversionary motion used to hide a sleight of hand trick, (like picking my pocket).

@SP
I am far more bearish than to think that the housing situation, (especially here in CA), will return to '05/'06 highs in only 5 years. I am just pointing out that 5 years seems to be the strategy cycle used by the authors of the plan.

Duke,

As long as its voluntary there is no way anyone can sue.

What about the guy that signs the paper a day earlier that is not eligible for the plan or the "homeowner" that has the same mortgage that is deemed to be able to affor the higher rate.

Good information J Galt and true to your name. I appreciate your insight. This is window dressing for the Bush administration and will have little effect long term housing market.

In a statist setup, that is precisely what the government does. I think it is immoral but few others agree so it is not illegal.

In any non-free system, there are two kinds of people: Those who put in more into the system than they get out of it and vice versa.

So, after a while, most people just spend most of their time and energy in trying to move from the first group to the second.

The simplest scenarios is taxes. I know a lot of people who think taxes are a wonderful idea and yet, I haven't met anyone who goes to H&R block in March and tries to increase their taxes. Even though none of us will come out and say it, those who support higher taxes would prefer that the taxes come from the mythical "rich".

Whoever makes $30K a year thinks "rich" is $60K a year. Someone who makes $150K a year thinks rich is whoever makes $300K or more a year.

How the system handles the housing bubble will be a valuable lesson for me, considering I missed out on the stock bubble. It will help me decide, the next time a bubble comes around, should I be prudent or should I just dive in and speculate? Since both the democrats and the republicans want to bail out irresponsibility, I suspect it will be the latter.

House prices seen falling 30 pct By Julie Haviv
Thu Dec 6, 6:41 AM ET

NEW YORK (Reuters) - Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody's Economy.com said on Thursday.

On a national level, the housing market recession will continue through early 2009, said the report, co-authored by Mark Zandi, chief economist, and Celia Chen, director of housing economics.

The report paints a worsening picture of the hard-hit housing sector, which is in the midst of its worst downturn since World War II.

While activity will stabilize in 2009, it will not be until 2010 before a measurable improvement in sales, construction and pricing will emerge, the report said.

House prices are forecast to fall 13 percent from their peak through early 2009. After accounting for incentives home sellers are offering buyers, effective declines peak-to-trough will total well over 15 percent, the report said.

Punta Gorda, Florida, and Stockton, California, are the hardest hit markets in the U.S., with price declines from peak-to-trough forecast at 35.3 percent and 31.6 percent, respectively.

"This is the most severe housing recession since the post-World War II period," Zandi told Reuters.

These markets have been hard hit due to several reasons, namely the exiting of investors from the areas, a fair amount of subprime mortgage loans causing an increase in foreclosures and overbuilding by home builders, Zandi told Reuters.

Home sales, however, should hit a bottom in early 2008, which will mark a 40 percent drop from peak-to-trough.

"The housing market's most fundamental problem is it is awash in unsold inventory," the report said.

In addition, the housing downturn will take a large toll on the rest of the economy. During the height of the boom in 2004-05, housing contributed nearly a percentage point to annual real gross domestic product, or GDP, growth.

In the current downturn, housing will subtract more than one percentage point from U.S. economic growth this year, and a percentage point and a half in 2008, with the effect on growth seen most pronounced next spring and early summer.

"The intensifying housing recession is expected to weigh on the broader economy, but not break it," the report said.

The Moody's Economy.com's report, titled "Aftershock: Housing in the Wake of the Mortgage Meltdown," said that when house prices hit their nadir, some 80 of the nation's 381 metropolitan areas will experience a double-digit peak-to-trough price decline.

Price declines, however, will vary in degree throughout the nation, with more than a 15 percent peak-to-trough expected around Washington and Detroit.

Significant declines are also expected throughout most of Arizona, California, Florida and Nevada. During the housing market's heyday, speculative activity was rampant in these areas, causing prices to surge much higher than other regions.

The Northeast corridor, and markets such as Boise, Idaho, along with Denver and Salt Lake City, will experience between 5 percent and 15 percent declines. In the rest of the industrial Midwest and parts of the Mountain and Pacific Northwest, prices will fall more modestly.

While some point to rising default rates in the subprime mortgage market, which caters to borrowers with poor credit histories, as the root cause of the problems plaguing the housing market, Moody's Economy.com said an unwieldy supply of unsold homes is the prime factor.

The U.S. Census Bureau said that, as of the third quarter of 2007, there were close to 2.1 million vacant unsold homes for sale, equal to 2.6 percent of the stock of owner-occupied homes.

A well-functioning housing market has a substantial amount of inventory, but in the quarter century between the early 1980s and mid-2000s, the vacancy rate stayed near 1.7 percent.

The difference between the two vacancy rates provides a good estimate of the amount of excess inventory in the market, which currently totals nearly 750,000 homes and is by far the highest level of excess inventory in the post-World War II period, Moody's Economy.com said.

Moody's Economy.com, which is based in West Chester, Pennsylvania, is an independent subsidiary of Moody's Corp and provides economic research and consulting services to businesses, governments and other institutions

If you think that there is no tax money involved, then you should read this Chronicle article.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/06/MN0RTONT8.DTL

"Treasury Secretary Henry Paulson also has urged Congress to pass a law that would let cities and states sell tax-exempt bonds to refinance mortgages for borrowers who otherwise might lose their homes."

I totally agree with the writer. 'If this is not a bail out, then what it is.' How are they going to pay back to bond holders? Unless the government is going to hold lien on these homes so tax money is going to be used surely. Why do I pay for their irresponsibility.

The people who get this redemption will pay lower tax then I do as a renter because their monthly payment hardly include principle while they afford their home. These people will benefit on both sides.

During the boom time, I endured the look down by other people because I don't own home. I was waiting for the price to be corrected while saving diligently. We didn't buy a new car. We didn't go to fancy restaurants. We didn't go for cruise. There are so many things that we didn't because we thought that that is extravagant. The affordability right now is just ridiculous. Where is justice department? I need to bring justice here. I cannot tolerate this irresponsible people.

Why do I have to subsidize their outsize life? This is unbelievable.

Also, Bush said that it is not going to help investors. If housing stopped bleeding and they hold onto it, then it will help them. Isn't it?

Nothing helps me. It just teaches me that I am all alone.

Any State or Local Government that passes Bonds to refinance mortgages is ultimately robbing from the many to feed the few. Any such measures need to be put down immediately. Really it would be no different than an FHA bailout, only at a local level.

As long as this is voluntary I suspect we will have to see MBS owners having to send paper to their owners explaining why it is a good idea and then getting their permission.

Duke, that permission is either (a) explicit in the MBS documents and signed off by the owners at inception, or (b) disallowed in the MBS documents and signed off by owners at inception.

In the first case, no new permission is required. In the second case, no workout is permitted and the borrower gets no five year freeze.

I think some confusion has arisen from a failure to recognize we're dealing with three discrete contracts or agreements here:

The mortgage agreement between lender and borrower is subject to renegotiation provided both parties involved reach an agreement.

The contract between the lender and the securitizing entity details allowances and restrictions necessary for issuing MBS, and it may impose limits upon the terms of workouts between lender and borrower. If the borrower proposes terms not permitted under the securitization agreements, the lender cannot agree to them, and no new terms are established.

The agreements and disclaimers produced by the MBS for an investor's signature at the time of purchase contain these details. By signing off on these terms and conditions, the investor agrees to these underlying contracts in their entirety.

Only in a case where lender workouts violate securitization agreements would a lawsuit follow, and it would be the MBS issuer who would sue, and not the investors. Investors may indeed decide to file suit as individuals or as a class, although competent counsel would almost certainly advise against it, and the most likely outcome would be failure in the courts and, of course, impressive legal fees to be paid.

Our Beloved Leader getting some ink in the SF Chronicle:
Patrick Killelea, a Silicon Valley computer programmer, runs a popular real estate blog at www.patrick.net that for years has blasted what he sees as the ever-expanding real estate bubble.

"We're talking about helping people who made bad decisions and asking the government to intervene on their behalf only to let them make more bad decisions later," Killelea said. "What if there was a Vegas bailout? I blew all my money in Vegas, but I should be bailed out?"

Bruce,
Nah. No confusion. Any contract can be modified as long as both parties are willing. In this case, the governement on behalf of the ARM crowd, is asking the investment crowd to renogiate their discrete contracts since (in theory) it would be in both parties interest. The trick is reaching the investment crowd for their approval since the act of securitzation massively diffused the ownership interest in any given property. I had written more details past this but its pretty boring, suffice it to say that the legal brains are making a run a proving this is in everyone's interest and everyone should agree.

What I find much more interesting in the legal realm are the judges refusing to allow Deutche Bank to forclose on properties. The judges feel the ownership interest is not conclusively proven. Woa! That should give massive pause to any who think Wall Street will continue to provide our historic low interest rates through securitzation. If your recourse to a non-performing loan is to have Vinnie the judge say, "Tough", there will be absolutely no-one left to buy these products. Makes it easy to mark to market - they are all worth zero.

I haven't waded throught Bush's "New Hope" proposal myself, but a lot of much smarter people who work in the mortgage industry have, such as Tanta from Calculated Risk. Her opinion reinforces J. Galt's opinion --basically, it won't apply at all to 0-3% "teaser" rates, and the majority of Jumbo-prime, prime Alt-A & option-ARMs won't be affected.

EBGuy,

Thanks for the link. You know, I could be a WHOLE lot more cooperative here if Paulson (among others) would simply come out and say...

"This was a major debacle and horrifying lack of anything resembling lending standards. We've lost prestige in front of our creditors and realize we are at your mercy to allow us to at least attempt to correct this. We're not even sure it CAN be "corrected"! We'll need to make amends to all of the responsible borrowers and taxpayers out there"

Yeah, then I could get on board!? However, as things stand all I'm hearing is "What has manifested itself is the result of... perhaps a little exuberance and we're going to do what we need to do to make it right. You may not care much for our tactics, but we're the ones calling the shots".

In which case all I can say is, best of luck.

Duke,

I would never want to imply that you were confusing the issue. Shooting past you, as it were, as I've seen some posts fearful that contract law is under attack. I was concerned myself at first, which led me to look at the business in detail.

As HARM so nicely points out, it's a token program in any event. Recessionary forces continue apace.

What I find much more interesting in the legal realm are the judges refusing to allow Deutche Bank to forclose on properties.
Cleveland is proving to be the proverbial canary in the coal mine for ferreting out all these "issues" surrounding the housing bust and securitization. Other gems include: how does a city figure out who to bill when combating blight as the mortgage has been securitized (see article I posted here over a year ago). Banks throw up hands and says, "Hey man, we are only the trustee." This can lead to the city taking much more aggressive measures as Wells Fargo recently found out. One of their foreclosed properties in Cleveland recently got razed as they did not properly communicate with the city that work was being done (after getting some nasty messages from the city manager). Also, Slavic Village is pioneering "forced urban scrap recycling" (aluminum siding and copper pipes) by desperate criminal elements -- coming soon to a mothballed Lenmar development near you. And block watches aren't that effective, if, ya know, no one lives there...

PS -- Tanta at CR is starting to remind me of the old EF Hutton commercials (not complaining here, as I "listen" too....)

Hi guys,

The government does not specify that they need any agreement from the investors. This is because if a loan is approved for this program it is taken private by the bank, and sold to FHA who would probably be paying a full price. Now, technically this is not a loss. It's the FHA buying a bunch of securities and putting them on their books.

Step-by-step case, someone calls the 1800 number and explains, 'I have such and such loan.' If the loan confronts to the criteria set, then the 1800 help person alerts the FHA or a new and coming GSE. It tells them, this and this loan from this and this bank is eligible. The FHA entity goes out and purchase the specific loan from the bank, hence taking it private. They then control the loan and can do whatever they want, such as freeze the rate. Since full price was paid and the loan was sold, investors don't really have anything to do. They just get money back.

And none are questioning which value of the property is considered when applying. If the last appraisal value is, there will be quite a few eligible loans around. Besides, just as the banks has been letting people sell for less instead of foreclosing, maybe they plan to do the same so the loan conforms to the government requirements just as they do many times for Fannie and Freddie loans. If they do it fast they can probably lose only as much as prices have currently fallen.

Marty

As far as people taking the government to court, they are currently not doing anything that is not a norm. They just approve loans based on specific criteria, just as Fannie doesn't want to give loans that are over 417k, and there are loans that are not given if the price is under 500k, such as many sub prime ones.
If the FHA says, we will only purchase loans originated between 2005 and 2007, and you loan did originate then, and you conform to all other criteria, and they refuse you, then you might have grounds for a trial.
Otherwise, it will be like going and suing Best Buy since you didn't get on "200$ Off Every HDTV" last week.

Sorry to burst your bubble. No pun intended :)

Marty

Thanks Marty, that answers a few questions that have been lingering in my mind.

Here is a good summary of the Plan.

Eligibility Requirements for a Teaser Freezer
A job
An income
Equity--borrowers must owe less on a home than it is worth
An inability to refinance
An inability to afford payments after a reset
A good payment history--delinquent borrowers do not qualify
A loan with a reset scheduled between 2008 and mid-2010
A loan issued between January 2007 and July 31, 2007

By taking to loan private the FHA will have to perform an appraisal. So recent mortgages with the equity to cover the losses the appraisal revelas makes sense - less the goverment be sued for favoring one class of borrower.

Frankly, I would be shocked if they even get the claimed 240,000 people (of the up to 2.8 million in trouble) as a number of homes are already heavily underwater. In fact, by dollar volume (which massively biases the problem to place like Palm Beach and Stockton) there is even less releif then the small amount of relief this 'fix' will heal.

So as a conclusion to this thread - there is no freeze. No one can sue. These are not the droids you are looking for. Move along.

Just in case anyone needs a link, since some people doubt this,

Story
Specifically:
"Under the plan, negotiated by the Treasury and White House with representatives from the private sector, borrowers will be able to refinance an existing loan into a new private mortgage or be moved into a loan from the Federal Housing Administration."

After watching Paulson talking about the plan last night on pbs, I think that this stories author took the statement out of context. I do not think that under the plan, the subprime homeowners will automatically receive a loan from the FHA.

I am more worried about the effects this bail out will have on foreign investment.

Currently we must import massive amounts of capital to keep our system going. The trade defecit, government debt, and our export of inflation will catch up to us. I wonder what will happen if the foreign investors decide to stop buying our bonds, t bills, and stop taking dollars for oil.

I believe this bailout will only lead to massive inflation here at home and an even worst set of consequences for the country than if we had not tried to step in. The Saudis will probably switch to a new currency before long such as the Euro. If this happens, god help us! You think $5/gallon is bad?

The foreigners will probably stop accepting US T-bills as well. All those wonderful programs that the government has will only survive with higher taxes on the tax payer. No matter what, tax payers will pay for this bail out with inflation and higher taxes for the government. China will stop buying our T bills as well. They will simply refuse to import our inflation and instead sell to Europe.

That is not all folks! Anyone paying for Social Security will be surprised to learn that the government really has no money in the trust fund. The government took the excess money and spent it! You will find plenty of T bills that are just promises from the government to pay for it later. I can see the government mailing these IOU in instead of a check. Can you trade IOUs for food/water/ or housing?

The US collectivly is nothing more than a crack whore trying to get the next fix no matter the cost. We will sell our own children's futures to slavery just to get that next hit. Soon our foreign creditors( drug dealers) will refuse to do buisness with us.