http://www.247wallst.com/2008/03/fannie-mae-fn-1.html
he idea behind the new plan has plenty of benefit for an Administration that wants to being some calm to the markets. but it only addresses half of the problem. Fannie Mae and Freddie Mac are losing billions of dollars because of home foreclosures. While they may be able to put more capital into the market, there is nothing in place to keep them solvent if their red ink keeps piling up. Solving a piece of the trouble does not do much good, at least longer-term. The two companies cannot do help rescue the mortgage markets if their own financial status begins to collapse.
http://globaleconomicanalysis.blogspot.com/2008/03/wamu-alt-pool-revisited.html
Cesspool Bottom Line
22.69% of a pool that was 92.6% rated AAA is 60 days delinquent or worse. 3.56% of that pool is REO. That's an amazing performance for an AAA pool whose issue date was May, 2007. At the current rate of progression it would not be surprising to see 30% of this pool get to REO status.
If the government ends up with a bunch of foreclosed properties on its hand, I have a great way for them to put such properties to good use:
VA HOME LOANS. Put veterans and their families in those houses with very low interest mortgages. Essentially, have veterans by the homes *at value cost*, not at speculation cost.
This means that a home worth $150k, that was originally far overpriced at $750k, be sold to the veteran for just $150k, what it is actually worth.
By doing so, the feds will drive the prices of homes down to realistic levels nationwide, overnight. But, and here is the big “but”, as soon as the empty houses are occupied by veterans and their families, the *price* of housing will go up all over the country.
It will have eliminated the surplus of homes, and restored the market to balance.