I know everyone out there, builders and Realtors included, constantly cry that it’s we in the media who are forever sounding unnecessary alarms in the housing market. Well, I don’t know that I can do much better than the Chairperson of the FDIC, Sheila Bair, who is telling a Senate Banking Committee panel today that the mortgage crisis has only just begun.
Bair says: “foreclosures continue at an unacceptably high level while true loan modifications are lagging”, but that’s just the tip of the iceberg. She also warns that in 2009, $600 billion worth of prime borrowers will see their “non-traditional” mortgages reset, and many won’t be able to find the cash.
Bair has been calling for a systematic, rather than individual, approach to loan modifications, but by warning about prime borrowers, it feels like she’s now bringing in the big guns.
Dodd’s Fix:
At the same hearing, Senate Banking Committee Chairman Christopher Dodd is proposing a $10-20 billion bailout for homeowners--a “Home Owners Loan Corporation” that would buy mortgages at a deep discount from mortgage firms and banks. It would then modify the loans to more manageable payments. Dodd claims the money would come back to the government, perhaps at a profit, when the housing market recovers.
Questions? Comments? RealtyCheck@cnbc.com
