It would be nice to know what the numbers are. I gotta think somewhere they have the numbers. How many of the mortgages upon which the bad paper is based are in default. That at least gives a starting point for how much money is needed. Maybe I am wrong, but right now I get the impression that Paulson doesn’t have a firm handle on this and that the $700 billion figure has been plucked out of thin air.
Likewise if the mortgage has been sliced and diced, does the originator of the loan foreclose or do the holders of derivative interests foreclose. The point I am getting at is that logistically, it seems that the Treasury Department is getting itself into something far beyond what it has any expertise in. From what I have read, it doesn't even seem like we are talking auctions of real property. Instead, what is being dealt with are pieces of paper made up of a portions of interests in multiple mortgages some of which may not be in default and some of which may be default.
I can’t find the link but somewhere in the Minyanville articles on this crisis they previously pointed out that there is $700-800 billion in corporate paper to be refinanced this year. That may be where Paulson got the $700 number from.
http://www.kitco.com/commentary/old/roulston/roulston_sep272007.htm
this article has a brief description of how mortgages of various default risks are stratified within a mbs.