There was a good article over at Inman.com the other day that discussed the direct effects the planned massive Wall Street and financial bailout might have on Main Street. Here are some good quotes from the article:
Once taxpayers are in charge of these assets, will troubled borrowers be more likely to get loan modifications or workouts to keep them in their homes? If the government becomes the owner of hundreds of thousands of foreclosed homes, will it sell them quickly at fire-sale prices to investors, or more gradually over time to earn a better return?
While there is general agreement that the government must take action to keep the financial system functioning, the question then becomes: What happens next?
“You save the banking system, now what are you going to do with all this distressed property?” said Dennis Hedlund, president and founder of the mortgage market forecasting firm iEmergent.
As detailed by Paulson, the plan envisions that the mortgage-related assets Treasury buys would be managed by private managers “to meet program objectives.”
If the government creates aggressive objectives to keep people in their homes — by forgiving some of the principal on their loans, for instance — “that could very quickly solve a lot of problems” in housing markets where prices continue to fall, Hedlund said. But that approach would mean larger losses up front, and perhaps a bigger bill for taxpayers in the long run.
“If the government does more modest workouts and hopes home values sort of correct themselves, there’s a danger home prices would continue to fall, and this could really stretch out,” Hedlund said. “It’s really a question of how fast do you want to get it over with? The faster you want to get it over with, the more the government will foot the bill, so there will be political pressure not to do that.”
We also get this:
In an e-mail to clients, K&L Gates attorney Larry Platt noted that Treasury has not spelled out any requirement to seek to preserve home ownership or otherwise deal with foreclosures and loss mitigation, “which is one of the biggest criticisms leveled at the plan by the Democrats. That doesn’t mean that Treasury will not implement an ambitious loan modification program; it just means that (as proposed Saturday) Treasury does not have to do so.”
…
Democrats will also push for looser criteria for the Federal Housing Administration’s HOPE for Homeowners loan guarantee program, which was authorized at $300 billion in HR 3221.