In an effort to stabilize the housing market and stem the tidal wave of foreclosures it appears that the Fed is seriously considering buying up the bad mortgages that are banks books.
from MSNBC
So far, government efforts to prevent foreclosures have focused on pressing the lending industry to work with at-risk homeowners voluntarily and provide them with more affordable payment terms. But the new proposal signals a shift to a more direct government approach, according to John Taylor, president of the National Community Reinvestment Coalition, who attended the meeting with Geithner, Housing and Urban Development Secretary Shaun Donovan and other Obama administration officials.
Now whether this is good idea or bad I will leave for others to decide. I know what I don't know. However if this does stabilize the housing market, allow folks who deserve to stay in their home to continue to do so I am all for it.
The article goes on to say:
The new approach could eliminate one of the biggest roadblocks that has stymied the government efforts to buy up so-called “toxic assets” that are clogging the financial system. Trading in these securities — backed by thousands of loans — has all but shut down because banks, investors and potential buyers are unable to predict their future value. But individual loans are much easier to value, making government purchases more practical, according to the plan’s proponents.
So I await comments on the merits or problems with this plan.
Please remember this is not a done deal merely being seriously discussed as part of TARP II.