From HW:
Bank of America Merrill Lynch analysts believe the federal government should begin investing in distressed real estate directly through a second round of the Public-Private Investment Program to reduce the shadow inventory of properties.
The original PPIP was a coordinated effort between the Treasury Department, the Federal Reserve System and the Federal Deposit Insurance Corp. to hold real estate assets off bank balance sheets in order to free up credit lines. Through July, the government has invested in more than $22.4 billion in the PPIP.
But while BofA Merrill Lynch analysts called the program a success for driving up the value of residential and commercial mortgage-backed securities, they said PPIP 2.0 would be critical to reduce homeownership rates, the amount of delinquent and foreclosed homes in the shadow inventory, and increase the value of real property.
Homeownership rates dropped to 66.9% in the second quarter, according to the Census Bureau. BofA Merrill Lynch analysts said the adjustment to a more natural 62% to 64% rate is under way. Converting another 3 to 4 million homeowners to renters would be required to get there.
At $200,000 a property, it would cost between $600 billion and $800 billion to make that reduction.
Initial targets for the program would be the 5.5 million delinquent borrowers. “Despite all modification efforts directed at this group, we think it is probably only a matter of time before these many homeowners are no longer homeowners,” according to the report.
The analysts assumed the second round of PPIP would fund up to $400 billion worth of homes, and private capital would compete for the remaining stock of the shadow inventory. Sales of distressed properties are set to peak in 2011 at 2.3 million transactions before falling to more normal levels at 850,000 in 2016, according to a report from John Burns Real Estate Consulting.
Using a group of property management companies, the analysts suggest the Treasury could keep these properties off the market for five to 10 years, allowing demand for housing to re-emerge.
Analysts did admit funding for the program would be difficult, considering the Troubled Asset Relief Program is set to expire Oct. 3, and further bailouts would be detrimental to any politician in the current climate.
“To put it mildly, in spite of its successes, TARP has not been particularly popular. We believe reauthorizing this type of spending on even a limited basis would be next to impossible, at least until after the upcoming election,” according to the report.
It’s funny, when friends and I discuss the housing market, and wonder how everything will eventually get resolved, I joke that the government will just buy up all the distressed inventory in the country and sit on it, never remotely thinking that something like this would ever seriously be proposed or actually occur. Now it looks like some clowns are proposing it become reality.
How far is this insanity going to go???
Not gonna happen…the TARP well has been poisoned.
It’ll continue as long as people like RB can vote, lol.
It is disconcerting, isn’t it, TL? It seems as though we are living in some nightmarish reality.
Heaven forbid we should ever have *affordable* housing. It’s all about keeping the slaves in debt…for life.
it will happen. The Supreme Court will rule that
Corporations as people are entitled to vote, One Share, One Vote, and that it was grossly unconcstitutional that corporations were locked out
of the last election, so, all federal races must be set aside and revoted with the Boards of Directors of every company casting proxies for their shareholders.
Fox news will find a missing blonde girl that same week.
From Imprimus, July/August 2010: “federal spending has been growing at an unprecedented pace. We are adding $4.8 billion to the national debt every day. The long-term viability of Medicare and Social Security isn’t merely uncertain—as so many analysts would have us believe. In fact, their failure is a sure thing without structural changes. By adding a massive new entitlement with the health care bill, we are simply going to go broke faster.”
After working a lifetime to pay off my mortgage, I am po’d every time I read about the feds paying that of others, with money that doesn’t even exist.
Vomit.Laugh,Vomit.
BofA Merrill Lynch analysts said the adjustment to a more natural 62% to 64% rate is under way.
They got this part right.
This is just a blatant cry for help from BofA, which had the wisdom and foresight to buy Countrywide and Merrill Lynch. Don’t let anyone ever characterize large banks as the “smart money.” They know what will happen to their capitalization ratios when they are eventually forced to assign true market values to the toxic assets they acquired. It’s just mind boggling in their brazen self interest and stupidity. Yes, “vomit, laugh, vomit,” indeed.
They seem to have accidentally left out some of the text. I’ve take the liberty of adding it back:
“To put it mildly, in spite of its successes at funding our yacht payments, TARP has not been particularly popular with middle class workers who foot the bill. We believe reauthorizing this type of spending on even a limited basis, hardly enough for new private jets, would be next to impossible until we get some higher-paid lobbyists, at least until after the upcoming election takes the pressure off the legislators we buy,” according to the report.
Perhaps, Nick. But how many other programs have we seen over the last few years, that we never thought likely to occur? Seems like anything is possible, no matter how ridiculous, stupid or short-sighted.
to pat b
The reason Fox News is so concerned about
lost blond girls is they need them for their
News Reader program.
Bank of America always believes the government should give them free money. How is this news?
In other news, Al Qaeda believes the US should continue funding the Taliban in Afghanistan.