Matters at Home

Remember how at first, Treasury was going to buy "troubled" mortgage assets under the TARP program and then Hank Paulson pulled the plug on the idea two weeks ago? Well guess what? Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee wants Treasury to buy troubled mortgages after all. In a new letter to Paulson, he asks that Treasury begin purchasing whole loans on a "large scale" for the specific purpose of modifying the loans and keeping borrowers in their homes. If Frank gets his way, I would assume Treasury will start hiring contractors to help carry out the plan. Ultimately, the decision will be up to the incoming Obama Administration and New York Federal Reserve president Tim Geithner who was just tapped to be the first Treasury secretary in the new White House

Let's talk about U.S. automakers, home prices and the unemployment rate. If one or two of the "Big Three" go down, rest assured that today's mortgage delinquencies will be a picnic compared to what follows. But first, a story I was told by closing attorney John McDermott who writes a column for our sister publication, Origination News. The Ann Arbor-based McDermott told me a friend of his works as an engineer for an auto parts supply company. The rumor making the rounds this week is that some of the company's employees -- including this engineer -- will be furloughed for the entire month of December. Now, think about all those assembly line workers, managers, parts suppliers and businesses that operate in communities where GM, Chrysler and Ford have plants. All are at risk when it comes to layoffs and furloughs. Let's assume that 60% of these workers have a mortgage. Should TARP money be used to extend a line of credit to the automakers? That's up to Congress to decide, but a $25 billion line of credit would seem like a small price to pay for avoiding even more damage to the economy -- and the housing/mortgage market in particular. If Congress does "bail out" the automakers it should be a "strings attached" loan with union contracts reworked and a mandate to produce more fuel efficient and cheaper cars. Maybe TARP money should even be used to sell the Big Three to Honda or Toyota. Oil is at $50 a barrel, compared to a summer high of $140. But does anyone really think oil will stay at $50 over the long haul? Go 'Green'