How to Solve the Foreclosure Crisis Essay -- Economics

There should be a bifurcated targeting of the housing market. The first and master(prenominal) target of the housing recovery needs to be the cautious restructuring of the government sponsored entitiesGSEsFannie Mae (FNM), Freddie Mac (FRE) and to a lesser extent FHA. Recent news headlines disgorge the be in possession of total mortgage market share for the FNM, FRE and FHA at seventy-two percent (72%) i of the entire industry.The restructuring of those three entities exit be a process of dividing their combined debt into at least ten smaller portfolios which individual investors can either incorporate into the existing businesses or form entirely new businesses made up of all or any part of the portfolio(s) they purchase. Each portfolio ideally will represent no more than a 5% to 7% share of the mortgage market so that we no longer have behemoths that are too large to fail.Further, the government will in all likelihood have to guaranteefor a limited period of time and with exp ectations of profit sharing similar to that of the banking bail let ons and in fact the funds the banks are now paying second could be used for the purpose of guaranteeing so as not to offend the publicpart of the initial funding that the private enterprises will need and deficiency in order to get their respective pieces of the mortgage market launched.The breakup of these three GSEs into numerous pieces will help manage the ability of achievement as it is not likely that all ten pieces will fail and as smaller players are easier to manage this will help increase the likelihood for success.In order for the government to get both the best price/value for each portfolio created from the breakup each of these portfolios should have different levels of mortgage debt risk. This will incr... ...o handle or avert another crisis should one come our way in the future and to return to the tax payer the monies it has already paid to bailing out these institutions. Works Cited i A combin ed market share of 72% for Fannie Mae, Freddie Mac and FHA as indicated by Mortgage Market NoteCIRE Magazine http//www.ciremagazine.com/article.php?article_id=307 (04/01/2009 09/14/2009) in addition see the NPR calculate at http//www.npr.org/templates/story/story.php?storyId=98285028 (12/17/2008 09/14/2009) ii BretWhissel Mortgage Calculator http//www.bretwhissel.net/cgi-bin/amortize (09/14/2009) iii American Institute for Economic Research report http//www.aier.org/research/commentaries/583-update-on-the-house-price-trends (10/16/2008 09/14/2009) also see the iTulip report http//www.itulip.com/housingbubblecorrection.htm (01/20/2005 09/14/2009)