Why the Treasury Sec Plan Must Past

Real Estate News

There are not enough lenders and loan programs available for a viable real estate market.

Inman News sums it up very succinctly in the following quote:

"The secondary mortgage market for nonconforming and subprime loans has collapsed, so those who do underwrite these loans have fewer options for selling them. Discouraged by the risk, lenders are squeezing their loan volume.

The wholesale lending market has disappeared: Big wholesale shops have gotten out of the business with the decline in the private secondary market (MBS), which was the golden goose for large loan aggregators.

Without liquidity, mortgage brokers and originators have fewer sources of capital, so they are originating fewer loans.

The number of traditional originators has declined dramatically. For example, Countrywide has been sold to Bank of America and WaMu is hanging on for its life. Other big lenders such as Wells Fargo are narrowing their lending band and taking fewer risks in this ugly market downturn.

These trends add up to a major credit squeeze for home buyers, shrinking the overall size of the pool of borrowers as the supply of listings grows dramatically. This supply-demand imbalance puts greater downward pressure on home prices, aggravating the cycle."

What will the Paulson Bailout Plan Do?

Without getting into the specifics, it will get the current troublesome loans of the lender'a books so that their finances will look better and they can again raise funds and loan them out.