The first pass of the foreclosure mitigation proposal is that I didn't see the key words of real-estate, "treble damages".
They need a carrot AND a stick to apply to servicers, so that public exhortations are 'backed-up' and there are not individual 'horror cases'.
How the "refinancing" will work I don't know yet. Paying a cash-subsidy to a bank, however, is not the first, best option. Someone should make an argument, at least, why subsidizing debt-holders during a debt-deflation is a good idea. Otherwise, the banks that cannot handle re-financing to lower interest rates need to be rolled up into those with the capital sufficient to handle the changes/charges.
The devil-in-the-details loan modification guidelines are not done yet. Why it takes even more time for the Democrats to come up with them, I don't know. This need has been on the table for well over a year.
The market needs to know that bankruptcy judges will be given guidelines as well, even if they hate them as much as, say, sentencing guidelines. Put them in.
'Judicial modification' should come alongside a broad re-thinking of the entire Bush-era bankruptcy change law.
Last, there seems to be little or no creative thinking. We are not refinancing people into innovative new kinds of loans, as some people have suggested. There is no 'transformation of the mortgage' market risk-sharing, envisioned, apart from 'judicial modification'. Therefore, we will go through this all over again, when housing prices fall the next time around, perhaps.
Thursday, February 19, 2009
First Pass, Bracing Against the Housing Bust
