In your example, the owner of the formerly $800k place has more of a "point" to staying in that place than anyone else does, so the amount of money you'd have to apply to let them stay is less than the loss that happens if you don't, and someone else buys the place. If that place is worth $500k on the market now, the homeowner already has that extra $300k of debt burden. You don't make it go away by declining to help them keep the house: one way or another, that money is gone. However, if the house is worth $500k on the market, it's likely worth more to the owner, let's pretend $600k. So if they can't afford it and someone else has to buy it, it gets sold for $500k and $100k worth of value goes *poof* - nobody gets it.
Obviously this only applies to people who want to stay in the home they're in now, and help ought to be structured that way.
I don't see the conflation either. In this subthread we're talking about the mortgages themselves.
If "liquidity" were the only issue, banks could just sell the securities they have no for whatever people are willing to pay for them - there are people willing to buy them cheaply. It's not the only problem. A plan that would obviously prevent a lot of foreclosures would give all of those securities a lot more value, which is the real problem.
Applying the same money directly at the financial institutions can possibly solve that same problem (though I'm skeptical), but it does so without the benefits of applying the money to the root of the problem.
no subject
In your example, the owner of the formerly $800k place has more of a "point" to staying in that place than anyone else does, so the amount of money you'd have to apply to let them stay is less than the loss that happens if you don't, and someone else buys the place. If that place is worth $500k on the market now, the homeowner already has that extra $300k of debt burden. You don't make it go away by declining to help them keep the house: one way or another, that money is gone. However, if the house is worth $500k on the market, it's likely worth more to the owner, let's pretend $600k. So if they can't afford it and someone else has to buy it, it gets sold for $500k and $100k worth of value goes *poof* - nobody gets it.
Obviously this only applies to people who want to stay in the home they're in now, and help ought to be structured that way.
I don't see the conflation either. In this subthread we're talking about the mortgages themselves.
If "liquidity" were the only issue, banks could just sell the securities they have no for whatever people are willing to pay for them - there are people willing to buy them cheaply. It's not the only problem. A plan that would obviously prevent a lot of foreclosures would give all of those securities a lot more value, which is the real problem.
Applying the same money directly at the financial institutions can possibly solve that same problem (though I'm skeptical), but it does so without the benefits of applying the money to the root of the problem.