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I am a 35 year veteran of the Real Estate Business. The quickest way to get out of the mess we are in is the following. Every bank and lending institution should be required to recast every residential, commercial, industrial loan to a "locked in" maximum interest rate of 4%. 3 1/2% per cent would be better. In my view, foreclosures would drop by 90%. Property owners would hold on for the next 24 months while the economy turns around (hopefully) and their stake in the "American Dream" would eventually become reality.
Remember, Banks borrowed the money from the Fed at very low interest rates, they then bumped their rates to the consumer, made their profits, then bundled billions of dollars of those loans to Wall Steet investment bankers who then sold those "bundles" around the world to governments, and pension funds. Wall Street commissions were huge! Then all hell broke loose. Payments on "negam" loans started to adjust, kicking in higher payments, and the rest is history!
Every 401K, pension fund, mutual fund has depreciated. Life savings evaporated. Unethical Mortgage Brokers are still using the system to lure homebuyers with "negam" and "stated" loans, these are applications that need no verification, and again banks are playing the same game. Why not? Freddie and Fannie are still backing each government loan. Mortgage brokers making more commissions and homeowers biting the bullet one more time.
Leadership is what we need….and the Legislative and Executive Branches are still performing like clowns in the Political Cirucs! PoliticalCircusBlog.com
6 Comments
It is not just changing the interest rate and the rate from variable to fixed. There also needs to be a cramdown in the value of the property to keep people from walking away from what would still be an upside-down mortgage.
You are right… neither one of our suggestons will be taken seriously by the banks or federal government! In the meantime…”Houston we have a problem!”
True and sounds good but they will never do whats right. Remember our loverly Congress let all this happen and even encouraged it and they would have to be part of making it happen. It’s realy not the crooks the banks or even wall street that is our problem it’s the Congress because these people think they know it all won’t admit they have been wrong and have to vote on any fix.
If they had acted when the crisis started it would have not gotten to the point it is now. After the dog is dead there is not much hope taking it to the vet. Now any fix can’t repair the damage. The people who lost their homes jobs and well being won’t get those back. The people who’s homes are at risk and who lost value any fix won’t come in time. By the time they could pass a plan like you suggest many more will have lost and those left will be worse off. Good luck America.
I like the blanket approach – if it’s good for those who meet some preconceived criteria of needing help with their mortgages, then it should be good for everyone. As a struggling self-employed worker, I seem to never be the target of these programs. If I go to a bank to refi, they would laugh at my irregular income, and probably would just suggest I sell my house for whatever I can get. Unemployment insurance? Not for me. Tax breaks? Come on, how does that help an “upside-down” earnings statement? We’ve got to help the temp workers, contract workers, and the self-employed business folks, and dropping interest rates on existing loans is one way, but not with a litmus test – those who need the lower rate would fail the banks qualifications for the low-interest loan.
Property owners can only wait and see what Wednesdays edict from Pres. Obama will bring….hopefully the folks that are currently in the modifacation mill will get quick fixes. New loss mitigations will take months, if not years to implement! The Feds want to do their part…States like California have to bite the bullet and cut spending at least 10 to 15% across the board. Taxpayers are tired of being “squeezed!”
The word is “modification” sorry for the typo!