Thursday, March 29, 2012

Mr DeMarco, Would you consider a debt-equity swap?

From Bloomberg:


The U.S. government has spent $190 billion to shore up the companies since they were taken into federal conservatorship in 2008 after their investments in risky loans soured. DeMarco said adding to the firms’ costs would be a violation of his legal responsibility to restore them to financial health.
Using principal forbearance instead of forgiveness so far has been better for taxpayers, DeMarco said. Forbearance reduces monthly payments while requiring borrowers to pay back the full amount of the loan when they sell the house.
“If the borrower is successful on the modification, allows them to stay in their house and they stay in their house and start making mortgage payments, the taxpayer gets to share in the upside of that borrower’s success,” DeMarco said in the Bloomberg Television interview. “If we forgive the principal up front and the borrower is successful, that upside all goes to the borrower and is not shared with the taxpayer.”
There is another way to allow taxpayers to get the upside of borrowers' success--replace the debt they owe with a shared equity arrangement.  The taxpayer may be better off with principal forbearance for houses that are 10 percent underwater, because through amortization people can get themselves right-side up in a relatively short time (particularly if they can get a refinance at a low rate of interest).

But for places like Las Vegas and the Central Valley of California, where many people are 40-70 percent underwater,  it is hard to see how default and large losses aren't inevitable.  A debt-equity swap would allow people to move freely, which aligning incentives between lenders and borrowers.

  

13 comments:

sarah said...

Real Estate investment in india,Real estate services for NRI, Premium Properties in India, Luxury projects in India, Property Management Services, Investment options in India,Best cities for Real estate Investment,Apartments in Delhi NCR Noida Gurgaon,residential plots in gurgaon,purchase gurgaon properties,Apartments in Delhi NCR Noida Gurgaon.
Real Estate investment in India
Real Estate services for NRI

Jaya said...

Don’t block your money in any unplanned business or personal venture. Let you bucks multiply by putting them in upcoming Real Estate Projects in Noida. They will benefit you for sure as the location of these projects is quite prime. What more do you want?

yizhantech said...

The speculative bubble in the housing market began to burst in the United States in 2007, and has been followed by ruptures in virtually every asset market in almost every country in the world. Each country proposed a range of policy initiatives to deal with its crisis. Policies that focused upon stabilizing the housing market formed the cornerstone of many of these proposals. This internationally focused book evaluates the genesis of the housing market bubble, the global viral contagion of the crisis, and the policy initiatives undertaken in some of the major economies of the world to counteract its disastrous affects.

homes for sale irvine

aadi said...

Real estate is always my first choice to invest. It gives good returns.
mortgage broker vancouver

davelinghal said...

it is also the best and creative idea in real estate investing.
i have accepts with Mr.DeMarco....


Dave lindahl

Mark Steban said...

Great post! I truly recommend this site to all my friends and to my family as well. Vancouver mortgages for self employed

Jaya said...

The very grandeur of any housing society lies in its ability to gratify its inhabitants to the core. And, when the discussion is about Ansal’s Esencia, how can anyone be dissatisfied? That’s the charm of Ansal API creations-Esencia being a well-known housing apartment in Gurgaon!

Mark Steban said...

True, being self-employed does not make you a prime candidate for mortgage. But this does not mean that you don't have the chance of having one approved. Vancouver mortgages for self employed

james anderson said...

Investment asset is an enterprise of capital. That is, you put a large amount of money to the right property and assets with the aim that you produce a substantial amount of money by either selling or renting out this property. Despite of the economic status real estate remains to be my ideal choice when investment comes in. Purchasing the right property from the right place through reliable people that offers excellent assistance & deal has always been the game. Explore the market by going deep in to the locality you are considering such as Costa Mesa home for sale and build your selection before making any decision.

Deepak said...

Invest in indian residential property like Windsor apartments in Noida Delhi for flats & apartments.

robert hess said...

Never found such informative articles
unsecured loans online

PALMY ROSE said...

Your blogs are totally worth giving time and energy.
instant pay day loans

turesta, said...

The size of an apartment or house can be istanbul real estate described in
square feet or meters. In the United States, this includes the area of "living space", excluding the garage and
other istanbul property non-living spaces. The "square meters" figure of a
house in Europe may report the total area of istanbul properties the walls
enclosing the home, thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface
definition has been istanbul real estate used.

It can be described more roughly istanbul real estate
the number of rooms. A studio apartment has a single bedroom with istanbul real estate
no living room (possibly a separate kitchen). A one-bedroom apartment for sale in istanbul
apartment has a living or dining room separate house for sale in istanbul
from the bedroom. Two bedroom, istanbul villa three bedroom, and larger
units are common. (A bedroom is defined as a room with a closet for istanbul villa clothes storage.)

In recent years, property for sale in turkey many
economists have recognized that the lack of property for sale in istanbul
effective real estate property for sale in istanbul
laws can be a significant barrier to investment in many developing countries.
In most societies, land for sale in istanbul rich and
poor, a significant fraction of the total land for sale in turkey
wealth is in the form of land and buildings.