Paulson Seeks Mortgage Value That Eluded Bear, Lehman (Update1)

[gopbuster]

Bloomberg: Special Report

Paulson Seeks Mortgage Value That Eluded Bear, Lehman (Update1)

By Bob Ivry
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Sept. 24 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson's bailout plan hinges on answering the question that has vexed global markets for more than a year and sunk two securities firms: What's a bad mortgage worth?

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Residential Mortgages

The Paulson plan would focus on $6 trillion of residential mortgages not currently owned or guaranteed by Fannie Mae, Freddie Mac and the Federal Housing Administration, and $3.4 trillion in commercial and multifamily loans and mortgage-backed securities, according to the analysts at New York-based Merrill Lynch.

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Subprime

The number of available mortgages will fall even further, said William Isaac, chairman of the Federal Deposit Insurance Corp. from 1981 to 1985.

``I doubt the banks that got burned in subprime mortgages will start lending anytime soon,'' Isaac said. ``I wouldn't expect a rapid comeback of the mortgage market anytime soon, especially the lower end.''

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`The current stop-gap measures to aid hard-hit financial companies will be repeatedly frustrated by falling home prices and the securities that back them,'' Miller said.

Ten percent, or $1.1 trillion, of the $11.25 trillion of U.S. mortgages are delinquent or in foreclosure, according to Guy Cecala of Bethesda, Maryland, trade newsletter Inside Mortgage Finance.

``The $700 billion theoretically would be enough to completely pay off about two-thirds of all troubled mortgages in the country,'' Cecala said.

http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=aGT_xTYzbbQE

[bemildred]

1. A bad mortgage is worth nothing.

Speculation about future events has no present value.

[Mojorabbit]

2. What is a multifamily loan?

Does anyone know?