The AP has a story on Bush’s proposals on housing and the subprime mess. I am glad to see that "no bailout" is part of the answer. A lot of people are saying that we have pulled out of it. There were two sentences that should remind people that the worst, at least on the subprime side has yet to come:
Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next.
Perhaps this reality has been priced in, but I don’t think so. In the short term, things can be done to make these ARM resets less painful, as Bush is proposing. But foreclosures and late payments mean continued weakness in liquidity, lower home prices, etc. This situation is not going away.
Now the question of the political impact is still up in the air. The WSJ has a story that is important to notice:
A survey by the Mortgage Bankers Association found that mortgages on properties that aren’t occupied by the owner — mostly investment homes — account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast.
We are still talking about massive numbers of people.
Also, the Big Picture has some great points about the timing of all of this.