Housing Bailout Chatter Gets Louder

Add another surprising name to the housing-bailout chorus.

Punk Ziegel analyst Richard Bove became the latest high-profile market observer Wednesday to predict that the feds will take action to forestall the collapse of the U.S. housing market.

Bad mortgages "have become a major problem," Bove says in a research note Wednesday. He suggests that the government may end up proposing to ease the pressure on the sagging mortgage market by offering low-cost federally backed loans to homeowners whose adjustable-rate mortgages are about to reset to much-higher rates.

Bove puts the cost of a bailout at $100 billion but says even that hefty price tag could come to be seen as modest given the scale of potential problems in the housing market.

Bove joins hard hitters including Pacific Investment Management Company bond guru Bill Gross in suggesting that government intervention could ease the pain.

The growing fear, expressed best by Countrywide chief Angelo Mozilo, is that the mortgage pain is likely to get worse and could crush the nation's economic growth. The comments from Gross and Bove are notable because neither has been seen as a wild-eyed bull on housing or an apologist for the industry.

In hindsight, it's easy to question whether many borrowers should have been granted a mortgage in the first place. It's easy to see now that eager home buyers were simply a cog in machinery that fed the likes of Countrywide Financial(CFC Quote) with fat fees.

Regardless, the slow-motion train wreck that is the U.S. housing market only looks to gain momentum over the next 18 months, as low-interest-rate loans reset to higher rates that may break many borrowers.