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Monday, August 18, 2008

A Creative Financial Fix to the Mortgage Crises?

Rick Santelli of CNBC (see - http://www.cnbc.com/id/15837966/) suggested that we create an opportunity for young home buyers to purchase foreclosed properties. There are pluses and minuses to such deals, but the underlying theme is that we need to create a way out of the mortgage crises. An interesting point that Rick made is that we (investors and financial institutions) must “bite the bullet” and step up to invest in new mortgage backed instruments. As a small investor, I agree that investors should invest some of their money to promote the greater good. However, this is sometimes difficult to see and reconcile with the capitalist creed to make money...

How to turn the mortgage crises around so that we have a win-win scenario? Perhaps there could be a way to interest REITs in the housing market if the offer was too good to ignore? Fannie and Freddie are sitting on large amounts of federal aid that are becoming more difficult for home buyers to access. If existing or new REITs could access these funds to buy, rent and sell homes, then perhaps we could create a creative way forward out of the current mortgage crises.

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