The FDIC plan is the lesser of all evils I suppose. Big wig guests on CNBC yesterday kept saying how these modification plans will help home prices. I don’t understand how any plan will fundamentally change the housing market and stop falling house prices. Especially a plan that makes people permanent renters. It may slow foreclosures but that just means house prices will take longer to reach affordability.
House prices are worth what people can afford to pay given current rates, loan programs, incomes, rents and overall economic conditions. It is very simple stuff. House prices were bubbled due to easy credit and excessive leverage which is gone indefinitely.
The problem is home prices are falling for truly fundamental reasons. Its not like the CEO got liquidated and drove a stock price down. Anything they try to do to avoid what is really suppose to be happening is a waste.
I guaranty you that sometime in the future, it will dawn on them that re-underwriting every borrower in American and dropping principal balances to what folks can really afford to pay is the only way to ‘fix’ this market. Then, home prices will fall but borrowers will not be stuck for the rest of their lives nor will they be renters.-Best Mr Mortgage