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WILL BAIL-OUT HELP LOCALLY
Federal intervention won't end local housing crisis, but it could help in the long run
Jim Wasserman The Sacramento Bee, Sept 20, 2008
Federal intervention in the financial system could wipe billions of dollars in bad mortgage debt off the books of Wall Street. But will it help end the housing crisis in Sacramento? Not directly, analysts say.
But eventually it could help curb the defaults and foreclosures at the root of economic problems locally and the nation as a whole. Housing industry watchers said Friday the plan announced by the White House could lead to easier credit and bring more buyers into the real estate market. .......
"I think what we are seeing in this confluence of events could be described in one word: a solution," said Stuart Feldstein, president of SMR Research Corp., a New Jersey lending industry analyst.
Feldstein said that just as falling home prices sparked the foreclosure crisis, rising home values will cure it. "To the extent that the government takes over the bad debt, banks will have more cash to lend," he said. "They won't have to keep their reserves as high against the bad debt. If a borrower's credit is good and there's a reasonable down payment, it should be much easier to get that loan." ......
More home buying, combined with falling oil prices and mortgage rates, could help ease pressure on foreclosures, he said. "It's going to take awhile for people in trouble to get out of it. But we should start to see an improving trend in early 2009," Feldstein said. .......
Mike Winn, chairman of the North State Building Industry Association, a Roseville-based home builder trade group, seemed less assured. His industry has been decimated since 2006 by layoffs and bankruptcies. "It's helpful to the extent that we've moved all the subprime securities from bad private debt to bad public debt. It doesn't make the problem go away," he said. "Just because mortgages are held by a public agency, the foreclosure issue will remain just as bad." .........
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