Does bailout add up?

Well I was just wondering how this proposed $700 billion would translate into the "rescue" of bad home mortgage loans.

How much is the typical foreclosure in arrears?

How much value has the typical house lost.?

How many homes are involved?

According to my math, if the taxpayers pony up $25K per house, $700 billion would rescue 28 million homes.

And even if we pony up $50K per house that would rescue 14 million houses.

Personally, I doubt the typical house has lost even $25K in value or that the typical owner is $25K in arrears.

And I definitely doubt there are 28 million homes involved. I doubt there are even 10 million homes involved.

So why do they need $700 billion?

(I am just trying to understand and I realize I could be missing something here)

Huh, how much value homes increased and lost depends greatly on what area of the country you are in.

My parents have owned the home they live in for 31 years, and they paid off the mortgage 11 years ago, but they tell me about what's going on in the neighborhood I grew up in.

A year or so ago, homes in their neighborhood were selling in the $300K range. Mind you, this is insane. Most of those homes are simple 3 bedroom ranches, raised ranches, and capes. We're not talking anything fancy. The lot sizes vary between a quarter acre to perhas three quarters of an acre. Nobody has any land or anything.

Anyway, now there are a couple of homes that have been up for sale for months and the prices are around $200-$225K and they aren't selling. That's a $100K in a year.

Also, I don't believe this bailout is about saving the homeowners from foreclosure. It's about saving Fannie & Freddie from collapse.

This bailout is about nothing more the cash flow. Because banks aren't getting as much money due to defaults and lower stock prices and the they fear more defaults and the continued decrease in stocks, they don't have as much money as the did, so they're being more cautious about who they are loaning to. Credit card companies are lowering credit limits and auto loans are harder to get.

As they said this morning on GMA, to now get a good rate on a home, you need a credit score of 720+ whereas it was 680 a year ago. Anything below 620 gets you nothing but 20+ interest loan rates.

What the government fears with the banks tightening on who they give credit to is that business and people will spend less money, thus putting us in a recession so they're taking the 700 billion to buy up bad debts to free up banks to continue loaning money.

What they are actually doing is privatizing profits while nationalizing debts and Congress is going to give a whole bunch of authority to Hank Paulson, who as Sam pointed out has $700 million invested in banks and investment firms and he gets to choose which ones to bail out.

Well back to the point does anyone know how many foreclosures are involved and the average amount it would take to "rescue" them?

No because there is no list of houses out there in foreclosure and not one dollar of this bailout is to rescuse foreclosed homes. This money is going to investment firms and banks that purchased packaged mortgaged loans and are now losing money on those bundled loans and need the cash flow to stay afloat.

"This money is going to investment firms and banks that purchased packaged mortgaged loans and are now losing money on those bundled loans and need the cash flow to stay afloat."

Well the question is still pertinent if the money goes to the mortgage holders.

Just because the loans are not worth full face value does not mean they are worthless.

For example, if the house is worth $50K and the mortgage is $60K then the bank would have to "eat" 16% of the loan.

Not 100%.

So what I am doing is trying to figure how much they would actually need if they do a "bailout".

I suspect far less than $700 billion.

That is what I am getting at.