Obama May Press Banks to Cut Mortgage Payments

This is a wonderful idea that will sound good but won't help many. If you want to understand the problem you need to look beyond the obvious. The obvious--about 9 percent of all mortgages outstanding are delinqunet or in foreclosure. The number of homes going into to foreclosure is forecast at 3 million plus. But, how accurate is that number. Down here in Florida banks are dragging their feet on foreclosures. Delinquent right now, expect 1-2 years before the foreclosure happens. So, its likely that time bomb is still ticking.

Let's say they gave every eligible owner a fixed rate mortgage at 4.5 percent. How many home owners would this benefit? How many of these delinquent owners can afford that price. Next let's say they "cram" down the mortgage to near market prices? How many would benefit? Does anyone know the answer to these questions? Does anyone have a number on what it would take to bring supply and demand into balance.

Supply and demand is really the critical issue. Here is what we know. An enormous amount of buyers bought their houses with zero down. So they started with zero equity. How many buyers bought their houses with zero documents? How many NINJA loans are outstanding--no income, no job, no assets. How many Toxic Option Arms?

Wouldn't it be a good idea to first understand the size and dimensions of the problem. To define the problem and then devise the solution? I guess not.

From the NY Times:

President Obama’s plan to reduce the flood of home foreclosures will include a mix of government inducements and new pressure on lenders to reduce monthly payments for borrowers at risk of losing their houses, according to people knowledgeable about the administration’s thinking.

The plan, to be announced Wednesday, is expected to include government subsidies for reducing a borrower’s interest rate, which a lender would have to match with its own money.

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