How Congress should amend it

As Republicans and Democrats return to fix the plan, I was heartened by the comments
by Rep. DeFazio, Edwards, Kaptur, Doggett and Cummings.
Buying a few securities and repackaging can only be a small cosmetic paper answer to the
crisis. What would be best would be to require that say 25 cents on every dollar be used
to work with the foreclosures and the impending foreclosures underlying these securities.
The rest be used to buy the MBSs. Currently no money is allocated for Credit Card, Commercial
etc., mainly the residential issue.

The procedure to follow is along these lines.
(1) The govt buys MBSs and mostly allows the CMO side of the bailout to take care of itself
or has a separate plan for this. It pays close to market rate on these MBSs targeting low distress
first (40 cents).

(2) In most cases, the Govt. should attempt to become the new servicer of the underlying MBS
or work closely with the agency that does the same. The agency or the Govt. should then
attempt to locate the foreclosed property, its owner and find a different owner for the property
if under foreclosure or a fair exchange if a current homeowner is in trouble.

(3) The foreclosed or soon to be foreclosed homeowner is found an appropriate property through a
downsizing process if one can be found and a appropriate and equitable loan with the Fed. The key is that the loan and the property found is appropriate for the homeowner.
The regrouped and repackaged MBSs is then sold for a profit.

(4) The Govt continues to provide a one to two year guarrantee on this paper and continues to work
with the servicer.


(5) Credit Enhancement of borrowers - Borrowers are given a chance to enhance their credit and offered
counsel. Subprime/Alt-A borrowers for whom the Govt. finds a home are kept out of MBS paper and directly
passed on to a lower rated MBS which is repackaged and CMO'd by FNMA or Freddie Mac with the
Govt. becoming the large equity tranche

Without foot soldiers on the ground, workign with actual mortgage holders this plan will not work. It will
probably take several thousand hired contractors to make this plan work.However, because it works at
the local level, it will feed financing into the local area as well as help reinvigorate the housing market as
some of the homes are fixed up also. This would also provide a stimulus in the local areas.