FHA Can Get It Done

During the biggest decline in commercial real estate that this nation had seen since 1929, the government swung into action and created the Resolution Trust Corporation to sop of the bad loans and get things moving again.

The numbers we saw this morning in existing-home sales remind me of the same kind of gloom -- pervasive, ugly, even scary.

And guess what? We are getting legislation courtesy of the run on IndyMac (ironically the biggest "houses will never go down in value" yammerer out there) and the trashing of Fannie (FNM - commentary - Cramer's Take) and Freddie (FRE - commentary - Cramer's Take) that will start our own Mortgage Resolution Trust, except it will go by the name of the FHA.

With $300 billion in money to refinance loans, the FHA can take the job of the RTC. Bank of America's (BAC - commentary - Cramer's Take) Countrywide-servicing division will offload people to it, so will Wachovia (WB - commentary - Cramer's Take). They might do it en masse, they might be able to do it. You will get a chance, by the way, to buy BAC off of what looks like the next big collapse/refinancing-if-lucky -- Washington Mutual (WM - commentary - Cramer's Take), the most reckless lender left.

The FHA is going to be the RTC, and that might be one big reason we have seen such a big run that now looks like it will have some retracement, based in part on this gloomy existing-home number, and in part from the momentary rise in oil, which is think is doomed (I am using a $110-$120 target for crude). Nat gas? $8.

Before you sell down the banks too hard or give up on them, remember that we had a 50% move and then a muddling and partial retracement off the top in 1990's bank market. I see the same because of the new Mortgage Resolution Trust, the FHA!

At the time of publication, Cramer had no positions in the stocks mentioned.

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