The rumored homeowner bailout in Greece may go to great extremes.
We all know things are bad in Greece. Really bad. Of course, things are not going great in the United States either.
A striking difference though, is the latest rumor of a Greek homeowner bailout. A friend at an investment bank in Paris sent me some of the proposed details, which show the extremes the Greek government is willing to go. And highlight just how desperate things are sadly becoming in Greece.
According to credit analyst Jean-David Cirotteau of Société Générale, austerity measures in Greece are killing the average homeowner. The government is looking at several options to help.
Here is the most extreme: Force lenders to halve mortgage payments for five years and offer a grace period — without penalties — for up to two years.
Distressed mortgages can be modified to terms up to 40 years. Considering the maximum age is 85 years old, go ahead and throw out the longevity risk analysis with this program.
And why not? That the Greek government is considering such measures underpins the lengths it is willing to go to maintain the highest possible solvency for its citizens. In other words, this is a country on the edge.
The residential mortgage-backed securities market in Greece hates the idea, of course, but the impact is likely to be muted. There are only 13 outstanding RMBS programs left in Greece, in what Cirotteau calls a "niche" market.
And yet, there may be a silver lining to the whole thing, as he notes.
"The challenges for the Greek RMBS market are clearly of the same magnitude as those for Greece within the eurozone which is not reflected in the performance figures," Cirotteau said. "Moreover, the market lacks clarity on its future; we can only hope this will be forthcoming soon, so that we can gain visibility on both Greek RMBS transactions and Greece in general."