No. of Recommendations: 2
The Treasury Department is authorized to "guarantee" home mortgages, essentially becoming a kind of co-signer, to reduce the number of foreclosures. If the home owner stops paying his or her mortgage, taxpayers would be on the hook. The Treasury Department can also eliminate a "reasonable" amount of a home owner's mortgage debt, under section 109 of the new law, which would likely delay the process of house prices falling.

Sounds to me like the bill might be able to slow the decline of home prices. And I bet there's more where this bill came from.

Anything that delays the decline of house prices will only make things worse. (But a bit later, which is important to politicians.)

Nothing can stop the decline. Except inflation, and that can only stop the nominal decline - not the real decline.

Given that the government is determined to interfere (I'm opposed), a rational approach would be to protect mortgage lenders from some percentage (but not 100%) of their losses on short sales and foreclosure sales related to mortgages issued prior to enactment of the interference. But even there, to avoid manipulation, we need some restrictions. The protection should only apply to short/foreclosure sales at a price reflective of a NORMAL relationship, for the area, between rental and purchase prices. As it happens, the average of that relationship from 1990 to 2000 is a good approximation of the long-term average.

Help for the borrowers? That any mortgage this guarantee is applied to becomes non-recourse: after the foreclosure or short sale, the borrower owes nothing more on it.
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