"Famed bond fund manager Bill Gross said the White House
should bail out the millions of American homeowners who
face the dreaded prospect of foreclosure this year.
If we can bail out Chrysler, why can't we support the
American homeowner?" Gross wrote in his monthly investment
outlook on PIMCO's Web site.
This came up the other day, and Doug asked:
> It's not clear who collects the rent - the mortgage holder?
But I have a better idea: if your mortgage is about to be foreclosed, you apply to FEMA for help. Call it a 'natural disaster' ... FEMA then buys your mortgage as of whenever you went delinquent (or something, a little fuzzy here). Spread the pain around a bit by having the note holder, in exchange for a quick exit from the about-to-tank-loan (and I mean quick: EFT'd overnight or better), drop all the accumulated interest-on-interest and late fees "for the National Good" ... kind of a reverse War Bond :-)
Then have FEMA arrange for Freddie and Fannie to, with the help of the Fed's printing press, service the loan at a refinanced no-closing-cost, no credit check, 40-year fixed rate mortgage equal to the national average (which just dropped this week). Yes, some people will still default on this, but the big chunk of uncertainty and unmarketable loans would be gone overnight. And a big chunk of people who would otherwise default and lose their house get a 2nd chance.
Ok, you'd have to get an agency that could process paperwork more quickly than FEMA. But still, what do you think of the idea? I bet it's cheaper than 6 months in Iraq.
/jordan