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Crisis crippling world markets is of course declining home values but so far regulators have directed.
Their energies on supporting struggling banks to -- to shift the focus joining us now our white capital management director of research Mike -- And Constance Mitchell Ford the real estate bureau chief of the Wall Street Journal good morning to the tune of you -- the -- let me start with you must.
This is my great frustration but -- -- specific why -- If the Treasury Secretary says the root of the problem is housing.
Why isn't there any legislation or any conversation right now about how which will only -- address housing.
Other than purchasing mortgage backed mortgage backed securities well I think there are some conversations going on I mean clearly the banking crisis and it's huge it's the -- of pickles.
-- -- -- -- So I understand why they're directing a lot of their emphasis there however it yet if it's.
Are in the housing market helping prices are falling -- been following all over the country.
There are few places that are exempt I think there are some measures out there I mean just this week we thought the attorneys general -- land where everything was brilliant yes.
It's it back and that can go a long way I mean obviously they're just starting with 400000.
Borrow words with Bank of America and they have promised that they will actually take aggressive steps to modify their -- -- and the aggressive step if what's key because what they're talking about dealing.
It's reducing the principal which essentially means the five of the market as well -- the interest rate to a level.
What people can afford.
But you have -- problem elect isn't that how do you decide who to help and who not to help -- -- -- very very tricky problem you also have the issue.
That a lot of the mortgages have been flights insight into mortgage backed securities and lots of investors and pieces of them while -- you get those back into -- Well I -- my frustration Connie is that if you're going to address it believe me.
The attorney general's you're making a deal with Bank of America to resent people's mortgages and do very much what you're talking that.
Appeared to me other than maybe hope now but I'm I'm not even sure how successful that's working right now -- -- think that's now I mean let's be real you know.
And that appeared to me to be the only instance where I -- a -- which holds mortgages being able to do something about it as opposed to the Treasury Secretary yesterday saying.
Well look we own these mortgage backed securities we can go to the people who were servicing these mortgages and tell them to reset them.
But these mortgage backed securities are so complicated.
The mortgages have been sold -- three banks in between and in the process is much more challenging.
But is this a -- attorney general option the only option we have right now toward addressing the issue.
It's probably not the only option but some people think it's probably at this point -- -- -- option also it -- A little bit of heat off taxpayers.
I mean the banks obviously created a lot of this problem -- a lot of people like to see the banks essentially stepped up and try to do.
Something about it but it's not the only program and right now -- Paulson and the Treasury Department does have both the ability.
And the mandate exactly to go in and do something about the mortgages but it's not clear to us right now what they will do and whether they will use their new powers forcefully you know my part of the issue for the American public was the language in this rescue plan that said that they would encourage.
Lenders that they -- -- -- at purchase troubled assets from.
To do something about it and then you have -- I had an -- coming out yesterday saying housing crisis.
One bottom until 2009 but you'd still be feeling the ramifications in 2000 intent.
How do we address the issue now also that this isn't a problem in 2000 -- While you actually I got that Mike.
You're you're you're exactly right I mean so far Washington's entire response to -- you mentioned hope now which -- really been a disaster hasn't done anything to relieve the pressure on American homeowners.
-- -- have five million homeowners that are either delinquent or already in full -- right now.
Another twelve million million homeowners are underwater in their loans they basically -- more to the bank at a mortgage company than their home is even worth now.
Because housing prices as you mentioned -- down dramatically fallen 20%.
Since the peak in 2006.
And you know most of the analysis I've looked at our own numbers -- -- run looks like housing prices are gonna stay under pressure for awhile longer because inventories are still sky high.
You're fighting foreclosure fire sales all around the country that put more downward pressure on prices and you know Lexus.
You know you're from now six months from now we're in the middle of the recession -- -- -- more pressure on homeowners.
Aren't so my back Mike let me ask his question you know it kind of brought up a good point -- Senator McCain drop this like -- by the way we should buy 300 billion dollars in toxic loans the other night.
But but she makes a great point and that is how do you determine.
Who is viable and who is not viable in in in in every discussion that we're having right now to how to get past that.
Well that's a great point -- -- as they always say the -- always in the details Randall Texas than you know I don't wanna be the person Washington try to figure out the McCain bailout plan.
Because as you mentioned I mean a lot of these home loans have been sold and resold and package adopted -- and sliced and diced by Wall Street so.
It's almost impossible to figure out you know you're home loan.
My homeowners who owns it now Roosevelt -- the Bank of America.
Most likely you know 110 of my loans owned by -- never banks so it's good you know it's going to be quite a challenge to try to try to untangle that giant jigsaw -- exactly.
Kind of milling about fifteen seconds here.
In the -- mine are in recent data that you look at as you're the expert are you seeing some places get better and then places perhaps like here in the northeast at worst I mean are we -- the tide shifting.
The tide is shifting a little bit I mean there's some mixed signs out there first of all California and Florida by far are the worst markets that's where a lot of the problem is.
Something like 40%.
Of the foreclosure starts of their 75% of the increase of foreclosure starts and those two states if we can do something to stabilize those two states go a long long way.
To helping the problem on the other hand.
The north -- but that's about to we think the some downward move.
What a story guys Connie -- -- was a pleasure having matured you wanna I wanna have the two of you back because I just feel this is the big story here and and somehow it's kind of we haven't figured out the solution but perhaps the two of you will help us our.
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