another 100B loss for lenders when rescue plan

completes?

Assuming the total original loan is X and assumes 20% drop on average for original loan amount. To be eligible for this rescue plan, lender needs to write down another 10% relative to current market value.

original: X
after 20% market down: 0.8X
after another 10% write down against 0.8x: 0.8 *(1-01) *X = 0.72X.
dump all 0.72X to gov. 300b plan: 0.72x = 300b.

X= 300b/0.72.

Assuming zero downpayment lender received: lenders lose (300B/0.72) * (1-0.72) = 111.6B.


assuming 5% downpayment lender received: lenders lose 111.6B - (300b/0.72) *0.05 = 111.6b - 21b = 90b.

this is only for homes this plan can cover! what about (3-5 million - 400000) which are not covered by this plan?

Conclusion: short financials without mercy when it runs out of gas in this wave!








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How does the refinancing process work?

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummented by as much as 20%, that will mean a substantial loss for the lender.