But the government may also end up paying nothing at all, largely because it received collateral in return for backing much of these debts and could recoup some money if borrowers stop making their interest payments.
And how exactly is that going to happen?! If you hold collateral, and your debtor stops making payments, then your collateral just became worth a whole lot less. You recoup no money whatsoever. Jeez louise. I didn't even have to use my MBA to figure that one out.
The article's author isn't the only one having trouble understanding what a "loss" means.
That forced him to reluctantly accept a major Democratic proposal that authorized FHA to spend up to $300 billion to help homeowners who, because of falling prices, owe more than their homes are worth. The expected cost to taxpayers of this program is $1.7 billion, the Congressional Budget Office said.
Wow. Apparently the FHA's potential spending of $300B that it doesn't have on homeowners who can't pay it back has no bearing on the cost estimate of "only" $1.7B.
The preceding non-logic is par for the course and shows us all why we are in such a mess. The lack of competence of journalists and government budget officials spills over to a mis-informed public unable to comprehend problems.
