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They finally recognized just how bad things are.
The government bail-out of Fannie and Freddie this week was touted by Secretary Paulson as a dose of prevention, but as far as we can see, and as much as I hear and read from you, so much damage has already been done. The question now is how much will this bailout stop the bleeding, and the squeeze, and the dismantling of chunks of hard-earned American equity?
The suffering isn't just from those who bought too much house. It's Joe from Arizona, from our success story on Friday's show, who went from earning, along with his wife, a six-figure income as a contractor to supporting his family on $65,000 this year due to the slowing of the housing market. It's home inspectors, restaurant owners, construction-equipment salesmen, single moms and households of multiple-generations. This is the trickle-down effect to the Nth degree and it may get worse before it gets better.
So what does this takeover mean for us? Initially, not much, though we should hear in the next few weeks of new plans for keeping more Americans in their homes. There may be an expansion of the Hope Now Alliance, built earlier this year to aid homeowners unable to manage adjusting mortgage payments and underwater mortgages. There will surely be a push to restructure troubled mortgages to allow more of us to remain in our homes -- it's a matter of when and how. Of course, just as with the S&L (savings and loan) crisis two decades ago, we'll all pay through our taxes. And there's the rub. When lenders were signing off on all those adjustable-rate mortgages (ARMs), interest-only mortgages, and non-income-verification mortgages, just who did they think would pay the price for starting the ticking of an economic time bomb?
Hmmmmmmm...
Keep checking in with me as I follow this process along and give you the scoop on what it means for homeowners and potential homeowners now, and in the future.
And tell us your story -- what are you looking for Fannie and Freddie to do? Can't wait to hear from you.
Data is a real-time snapshot *Data is delayed at least 15 minutes