OK, so the bailout is to cover bad mortgages, but who gets the money when a foreclosed house finally resells?

Is this really going to end up costing us $700B or will we get some of that back?OK, so the bailout is to cover bad mortgages, but who gets the money when a foreclosed house finally resells?
Paul and daeve930 hit it right on the head. The government is doing this to keep us from spiraling into a depression like the one back in 29. Only much much worse.





Things always seem to repeat themselves, no matter how advanced we are.





Part of the problem was that people overestimated (or really didn't care) if they could pay the loan off that they took with no confirmation of income.





The other part are victims of a bad economy. Most companies have laid off people in a time where jobs are there, but not enough of them. And the pay will never meet what these people need.





I know most people's salaries have dropped either 10-40% from 2 years ago.





So the bailout is a mystery; but I truly think all the good ole big boys are trying to figure out how to keep their salaries intact, and let's not mention their bonuses that far exceed their salaries any day of the week.


OK, so the bailout is to cover bad mortgages, but who gets the money when a foreclosed house finally resells?
That's the problem Congress and Senator Obama have with the current bailout plan. The Bush administration has not answered those questions yet.





What happened is that lenders approved mortgages for people that couldn't really afford them. They then sold these mortgages to financial firms who thought they were investing in safe mortgage-backed securities (rising prices, people screened and approved for the mortgages, etc.). This happens all the time and has been going on for years. A buyer secures a loan through one company and that company isn't in the business of maintaining loans, just acquiring new lenders. A lot of these mortgages are bought up by investment firms, who sit there and collect your interest for how ever many years you pay on the mortgage.





But, when people started defaulting on these loans they never should have been issued, the financial firms that bought them stopped getting payments on them. And, they already ponied up the money - usually by borrowing on other securities they own - to buy the mortgages. Now they have to repossess the properties (foreclose) and sell the properties for what they can get, which is usually less than market value, because they want the property to sell quickly (they lose money every day they hold onto it).





Now they don't have any money to pay for the loan they took out on their securities and they have to liquidate assets at a discount to pay off those obligations. When they run out of money, they go bankrupt. This then has a domino effect throughout the world financial market of companies not being able to pay off their financial obligations.








The basic bailout plan is to give the financial companies the difference between what people owe on their properties and what the company can get for it at foreclosure. So, the company doesn't lose any money by filing foreclosures and they can pay off their obligations. So, the world financial market stays stable, despite the fallen real estate values.





The problem is, how do we know this is going to work? What's going to stop a financial company from taking the money the Feds give them and investing it foolishly again? What's the return on investment for the taxpayers and the federal government? And, what kind of regulatory and administrative oversight will be put in place to ensure no one takes advantage of the bailout plan?





This bailout plan simply cannot happen until these questions are answered. And, fortunately we have a Democratic congress that is stepping up and asking these questions before rubber-stamping the biggest and riskiest corporate bailout in world history.
If the banks fail, what will happen to your money? Think 1929. What would the government do with the houses? Are they going to give them to deserving people, who would then have to be able to afford the upkeep and taxes? I doubt it. They can't handle the real estate they already hold. This town is over run with dumps owned by the city.





I just read something that said if there are 300 million people in this county, the bailout equates to $2300 per person. Maybe it's a bit more palatable that way.





Don't forget that a lot of ';bad'; mortgages were good ones until the home-owner's job was shipped to India or Sri Lanka. This government allowed that to happen by encouraging corporations to export jobs by giving them tax breaks. We import goods from other countries where people are paid $1 a day. We have created a very unequal trade balance and let other countries tax what we send them but we don't tax what they send us. There's plenty of blame to go around...the world is not a vacuum.
The government is buying mortgages for 40垄 on the dollar. If the homeowners pay in full and on-time, the government will make a profit of 60垄 on every dollar invested. Some people think the government is overpaying. Merrill Lynch sold their loans for 22垄 on the dollar. The buyer of those loans could make a huge profit; or they could lose their shirt. Only the future will tell. It will not cost us $700B..
This may be radical thought in this forum, but I'm totally against the bailout. The two culprits (lenders and home-buyers) should suck it up like I did. Did I want to dig into my 401K...no! Did I want to sell my second car.....no! I'm very disappointed with this decision which will possibly be worse than the alternative.
When a house is foreclosed, the bank takes the loss for the unpaid loan. The bank assumes the property title and then resells the house for whatever it can get.
The bank that holds the mortgage. Not all foreclosures are due to defaults on sub-prime loans.