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Strategies & Market Trends : Portfolio Construction -- Ignore unavailable to you. Want to Upgrade?

To: Keith Feral who wrote (588)	8/24/2007 9:52:04 AM
From: Keith Feral	Respond to of 1964

It's really puzzling to see the government start sponsoring this notion that foreclosed owners should be protected. Are we trying to nationalize the housing market. If so, that violates the right of the institutions that have bought these loans. How can we rewrite covenants that will prevent buyers of buying distressed debt at a substantial discount, knowing that the underlying value of the properties is worth twice the amount. If I buy a BBB mortgage one Joe Sub Prime home for $40, I could turn around in auction and sell the home for probably 70 cents on the dollar. That invites strategic buyers to come into the market to buy the distressed debt. The collateral is worth far more than the price of the debt. However, if the government let's dead beats become squatters in the homes they refuse to pay, how will the buyers of the distressed debt be able to make rational decisions about the turnaround of the property. I think the a monetary cut to prevent mortgage rates from resetting is the easiest way to solve this problem, not having the FHA issue more strict rules about foreclosure. Banks are very good at overshooting these kinds of problems to wipe out competition and create value for themselves long term. I don't think they can put the rules back on the existing mortgage holders.