How to Solve the Foreclosure Crisis Essay -- Economics

There should be a bifurcated targeting of the house market. The first and main target of the housing recovery needs to be the cautious restructuring of the government sponsored entitiesGSEsFannie Mae (FNM), Freddie mack (FRE) and to a lesser extent FHA. Recent news headlines put the unite total mortgage market bundle for the FNM, FRE and FHA at seventy-two pct (72%) i of the entire industry.The restructuring of those three entities will be a process of dividing their create debt into at least ten smaller portfolios which individual investors can every incorporate into the existing businesses or form entirely new businesses make 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 check of time and with expectations of profit sharing similar to t hat of the banking bailouts and in fact the cash in hand the banks are now paying back could be used for the enjoyment of guaranteeing so as not to offend the publicpart of the initial funding that the private enterprises will need and want in lay out 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 success 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 legal injury/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 about 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 combined market share of 72% for Fan nie Mae, Freddie Mac and FHA as indicated by Mortgage Market shadeCIRE Magazine http//www.ciremagazine.com/article.php?article_id=307 (04/01/2009 09/14/2009)also see the NPR report at http//www.npr.org/templates/ reputation/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)