For 50 Billion, we could pay 1/2 of the monthly payment of all currently in default mortgages. That would buy us a year.

Key is to get land prices back up, that means higher wages. Then we can fight inflation….

No easy solution here, but there ARE solutions.

From what I understand, the MBS/CDO’s are only the trigger for the real problem which are the CDS’s. If the CDS monster can be tamed Option one becomes especially more desirable.

I agree with some of the experts who have weighed in on the CDS issue that one way to solve it is to create an exchange for them and require registration within a short time period (or else the swap is null & void). Once everyone lays their cards out on the table we can see who can cover the losses and who can’t. Immediately it would clear the air and allow everyone to see who’s at risk and who isn’t. Once the losers are identified and go down, the winners can pick up the pieces and the market can function. Absent this type of action there is no way to know who will survive and who won’t; no wonder the credit markets have frozen, nobody can be trusted.

No matter what, propping up housing is such a lame way of attempting to resolve this issue.

Option One: let it crash and burn. Good for people like me who haven’t bought a home yet, because it will quickly bring prices back down to where they SHOULD be, and would probably teach people once and for all that a home is not an ATM. However, the financial fallout would impact more than home affordability, and it would take a lot of the economy down with it.

Option Two: help only the people who need it. Would keep people in their homes. However, the responsible people who don’t need help, who got fixed-rate mortgages they could afford are ALREADY going to stay in their homes, and they’re not going to be happy to see their tax dollars go to bail out the idiot next door who maxed out their HELOC. Keeps home prices artificially inflated, but results in a slower fall.

Option Three: help everyone who has a mortgage. It’s still a bailout, responsible people will get a proportionately small handout compared to irresponsible people, and it will keep home prices artificially high because there will be fewer empty homes than there should be.

I mean, there’s no good way out. We’re all screwed, we’re all going to pay for this mess, and the economy is in the toilet because of this housing bubble. If nothing else, I’m rooting for Option One because it will probably ensure sure this NEVER HAPPENS AGAIN.

I don’t think advocates of principal reduction can have their cake and eat it too. Either it’s everyone or no one (see my last post as to why I believe this). If you say “everyone” the financial impact is essentially the same as everyone foreclosing. How can that be better than a subset of them going to foreclosure?

The entire system of credit and leverage is to blame. It became acceptable to do 50% debt to income ratios, interest only and stated income on 750 credit score, salaried, Prime borrowers. What you are talking about with respect to fraud etc is a very small slice and I would argue a very small percent of the real problem.

I do feel for those people that put down hard earned cash and have honestly done all they could to keep the mortgage up and tried to do the right thing.

I just wanted to bring up a point, that is never mentioned that fits on a lot of initial foreclosed.

Those who get screwed because they did everything right is a moot point. I know plenty of people who put 25% down on a 30-year fixed 2 years ago who are now underwater by 25%, cant sell, cant refi and are considering walking. Be careful what you wish for.

So,even though I realize that it’s very traumatic to go through foreclosure, isn’t the perspective similar to the old question of ‘Is it better to have loved and lost or never to have loved at all?’.

It’s easy to just look at the negatives, but I dare say that having owned a house for 2 or 3 years puts those people ahead of where they would have been without that. The person with the right mindset will see that they were able to accomplish something that they never would have thought possible. And once you accomplish something your personal impression of your self worth goes us and that means you will try to accomplish other things you hadn’t thought possible. It’s a chain-reaction.

So, in my opinion – the person with the right attitude will have won, even with foreclosure, whereas those just whining the ‘victim game’ will never get anywhere.