Does the housing industry need a bailout? Michael Feder, CEO of the New York-based real estate analyst firm Radar Logic, says it may. An oversupply of distressed inventory will have to be cleaned up before the housing market can come back, and that means large numbers of debt modifications will be needed, requiring lenders to take losses on their loans.
But Feder says the government itself may be in the worst position, since it has underwritten or guaranteed almost every new mortgage written since the financial crisis began. A great deal of that distressed housing inventory has been financed by loans that are, essentially, the assets of the American public.
By Feder's estimates, if the government liquidated all of the paper it holds in distressed mortgages, the bill to the taxpayers could be as much as $750 billion.
How can the government get out of this mess? In the video below, Feder looks back to the savings and loan crisis of the late 1980s and early 1990s, which led to the creation of the Resolution Trust Corp. He says a similar approach today could offer one solution for the housing industry's current woes.
Does the Housing Industry Need a Bailout?