Happy New Year! Lets Start Thinking Outside the Box

We all have hopes and dreams for this New Year. Sadly, there will be a huge number of home owners that will have lost their homes to foreclosure. This is an unfortunate circumstance. Over the next year there is reportedly going to be approximately 1.4 to 1.5 million more foreclosures that will hit the market. This is a staggering number. The banks do not have the ability to adequately handle this overflow of properties. The adjustable rates are ready to tick up and that will force many into despair.

I have a suggestion to throw out to the powers that be; many banks are talking of repaying the TARP funds and that they have reached financial security. That is BS! The only way they have become whole is by smoke and mirrors, selling off bad loans and forsaking the general public in their time of need. I do not want the lenders to suffer a loss; they deserve and need to get paid as prescribed in the original notes. (Here is my suggestion) If the lenders used the Tarp money to pay for the adjustment of the mortgage up tick (in other words Buy down the rate utilizing the government funds) we could avoid many of the next round of foreclosures. The recipients of the funds would need to be current in their mortgage and would be required to pay back the money with interest upon the sale of their homes or upon a reammortization of the debt in a prescribed time period (5yrs). It sounds complicated, but actually it is a mortgage principle that was used years ago. It is a buy down with an equity adjustment to avoid a negative value.

Here is the outcome that I would hope to achieve.

1. Home owners get to keep or sell their homes; thus avoiding foreclosure, short sale nightmares and the ruining of the American Dream

2. The lenders would not loose the money that they so desperately need to make the country function as intended. We have already allocated the TARP funds and much of it currently are not utilizing.

3. The lenders would not have to try to maintain a slew of houses that inevitably fall into disrepair and yield pennies on the dollar for the amount owed.

4. Neighborhoods, cities etc would not devaluate to a point where they suffer from tax delinquencies, increase crime rates and the general malaise that flows along with high foreclosure communities.

5. Pride of ownership returns to many communities that so desperately need rebuilding.This fix may seem like a band aid for a short period of time (5 years) but a lot can change in that much time, especially if the downward cycle can be lifted.

My guess is the cost of funding this buy down plan would be less than the losses incurred by the mismanaged, broken down, frozen and neglected properties that the lenders are trying to sell. The general public can not purchase these albatross’ due to the inability to finance these elephants. We need to start thinking outside the box!