Under the new "bailout" — "rescue" — legislation, Treasury will be purchasing billions of dollars of mortgage-backed securities — mostly backed by subprime mortgages.
Once Treasury has ownership of these securities, the government becomes the owner of the mortgages and, like any owner, responsible for administering the mortgage (i.e. collecting payments, maintaining the property, etc.).
The actual work will be done by servicers who act as the agent of the owner. Despite use of contractors, the Treasury will be responsible for how the mortgages are treated. Thus, a foreclosure will mean that the government is responsible for putting the owner out of the family house.
The inventory of mortgaged houses that has the US Treasury as landlord will be in the millions. A lot of property that must be maintained to protect the government's investments.
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The Treasury will try to sell these mortgages as quickly as possible, but until they are sold, the landlord for ensuring the grass is cut and the plumbing works will be good old Uncle Sam.
I wonder how good the Secretary of the Treasury is at fixing the broken stoop and collecting money from widows and single moms?
This guest blog was written by Mr. Seidman by hand in the CNBC studios.to see a PDF of the original document.