|For What It’s Worth….|
Here are some compromise solutions that Congress is ignoring. Obviously, congressional Republicans are resisting any solution that the administration might claim credit for during the next election cycle. Regardless, here are some ideas that we can push for.
Net worth of our national community and employment are major issues but in large measure dependent upon a clear and rational resolution of the housing crisis. A careful examination of our housing crisis options is clearly in order.
Here are a few bed-rock facts that must be included in any housing crisis discussion.
Summary: This national disgrace must be brought to an end! It is a national disgrace that Congress allowed and even enabled this crisis to happen. It is a national disgrace that Congress has not owned up to their responsibility. It is our, the American public, disgrace that we have failed to demand effective action by our government to undo the damage. Below is a set of ideas not previously mentioned in all the dialogue back and forth regarding this national scandal. While it may sound complicated at first, it isn't really - just read it through.
Suggestions to Remedy the Housing Crisis:
2. Prosecute all persons and financial institutions having committed significant fraud against the American people. The message must be loud and clear that fraud and gaming of the system will not be tolerated.
3. Select at random cases among the worst 40% and send notices to all parties to appear at a given time and date before an adjudicator (need not be a judge) and that all parties must bring all information regarding income, etc. Failure to appear would result in a felony arrest warrant for any "no show."
4. If the facts indicate any reasonable level of fraud the involved persons may plead "no contest" and be given a minimum sentence. They would, however, have it on their record of felony fraud.
5. Now regarding underwater homeowners - before any further foreclosure would be permitted all involved persons would be given a mandatory appointment time to appear before an adjudicator. That adjudicator would then determine what level of mortgage payments the homeowner could handle at 25% of their income.
6. The government adjudicator would then amend the mortgage agreement to reflect a loan principle that the homeowners could handle on a 30 year fixed mortgage at 5% interest. This new mortgage would be assumable to new owners should the house be sold. (Older VA and FHA loans used to be assumable.)
7. If all parties agree, the government would pay down the loan principle to the revised amount and then take out a durable lien on the property for the amount of the write down. An official appraisal of value for that lower amount would be given to the homeowner to file for any real estate tax reduction.
8. The new government loan would be free of interest and principle payments for five years. Starting with the sixth year the government lien would require interest only payments for the next five years at the same interest rate the government was receiving for 10-year bonds. Starting with the 11th year both interest and principle payments would be required with a fixed interest rate equal to what the government was receiving for 30 year bonds at that time. The government loan would also be assignable to any future owners with the same conditions.
9. Should the homeowner sell the home at an appreciated price the capital gains would be split equally between the government loan principle and the homeowner's equity.
10. Should the home be sold for an amount less than the total loan values the government would have a permanent or durable interest on the property which any new purchaser would need to satisfy before getting a clean title.
11. If the current loan holders object, the government could seize the property under eminent domain and directly refinance the loan with the homeowner as described above.
12. Finally, This arrangement would not significantly increase the government debt because the government would be swapping one assed (money) for another asses (real estate). Lenders would get back loan principle that is now at risk. Homeowners would be more able to sell and relocate to economically better regions as the financing for their homes would already be in place for any "worthy" borrower. By delaying interest and principle payments homeowners would have a far better chance of participating in the economy by having more disposable income.
Beneath all the political verbiage there are significant, ignored facts and considerations that we need to be aware of. And, this is what Fogcutters is all about.
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Searching for solutions avoided by politicians and activists!
Millions of families have faithfully paid their mortgages over the years. Now the dream of owning one's own home is fading quickly. And now millions are being hurt by those trying to "game" the system with impunity.
Fraud & Abuses have cost Americans hundreds millions of dollars. Congress has failed to crack down on this serious fraud.
P.S. So why hasn't Congress already cracked down on fraud? Remember "Past is Prologue."
____ More Sources ____
Congressional Testimony by FBI in Oct. 2004
Who's to Blame? This Daily Finance editorial writer blasts the banks but takes homeowners off the hook.
Financial Crisis Inquiry Commission - Releases Report on the Causes of the Financial Crisis.
Side Note from Fogcutters: