Quote:
Originally Posted by Aliantha
Rather than subsidise the mortgages, they should simply buy the house from the bank, then 'rent to buy' the house to the foreclosee on a long term deal (say 25 years).
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That is what banks (et al) do. They resell these homes to companies specializing in refurbishing and refinancing homes to new qualified buyers. The problem is that American incomes in those price categories have been falling for the past seven years (relative to inflation). Interest rates are rising. Economic downturn is a real possibility.
All that means there are not enough companies to move these homes off the banks hands fast enough. Furthermore, many of these defaults are to large financial institutions who are not setup to handle so much defaulted real estate.
The system is swamped with too many homes, and liquidity shortages. A problem made worse because the market was inventing liquidity where it did not exist with money games.
Those homes lie on a fault line; an earthquake only in that part of the economy. It will take years to resolve. That neighborhood is the risk everyone takes when buying a home.
Meanwhile, this same problem has long been ongoing in some areas such as Detroit. Your report only cited a different area. But the same problem has long existed.
Americans are spending 10% more per year than they are earning. As Cheney said, "Reagan proved deficits don't matter." Welcome to the reality of what has not mattered for many years now. It could be ignored for many years by playing money games such as sub-prime mortgages. Sooner or later, the economy takes revenge - takes back what it is due. The problem existed many years previous. So we played money games to ignore it. Sooner or later, we have to stop playing money games and acknowledge the economic problem created by too much money migrating up to the top 1% - and too many lower incoming falling for the past seven years.