First, a mortgage payment insurance scheme is not a get-out-of-jail-free card. People will keep paying because they want to keep their houses. The point is to do a loan workout on a national scale and give the secondary mortgage market back its lost confidence.
Second, we're talking about a national-level program.
> Besides, given delinquency rates for the whole, not just subprime, mortgage market, Julio's plan would cost about as much as the proposed one.
>
> Doug
I think you're wrong on the numbers. There's about $11 trillion in U.S. home mortgage debt as I understand it. Much of that is already guarantgeed by the Agencies. So you're talking about maybe $6-$7 trillion in remaining debt at most. Some of that is issued to people are practically zero default risk. Some of it is fraudulent and shouldn't be insured by anyone. Even if that leaves $6 trillion, how much are you really going to need for an insurance fund?
Besides, the government intervention in the RMBS market won't work. American RMBS is like Chinese powdered milk - would you buy Chinese powdered milk simply because you read that the Chinese government had started buying it?
Obviously not.
It's a destroyed, "lemon" market.
-- peace,
boddi
http://financialroadtosocialism.blogspot.com/