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Thus far, federal loan modification schemes and state foreclosure prevention initiatives have largely failed in averting the foreclosure of homes and in helping troubled homeowners.
The following three schemes have been recommended by experts to help solve the foreclosure crisis and revitalize the housing market:
- Mortgage bond guarantees
This scheme was proposed by Jack Guttentag, emeritus professor of finance at the University of Pennsylvania Wharton School. Guttentag explained that the goal of his scheme is to persuade owners of mortgage-backed securities to allow loan modifications to prevent further foreclosures. Mortgage-backed securities would be insured by private mortgage insurance firms, which in turn would be backed by the federal government. The government would cover part of insurance losses incurred by private insurers that would ensure bond owners get their payments in cases of defaults.
- Mortgage interest subsidies
This strategy was proposed by James Grosfeld, former chief executive officer of Pulte Homes. Grosfeld asks the federal government to subsidize the monthly amortizations of homeowners who took out mortgage loans from 2005 to 2007. Grosfeld said that the loans released during these years were mostly subprime, adjustable-rate mortgages and Alternative-A paper mortgages, which are highly risky types that ultimately led borrowers to defaults and foreclosures. He said that if the government rescued financial institutions which involved themselves in highly risky investments, it should also rescue individual homeowners who took out risky types of loans that they did not fully understand.
- Policy of allowing home prices to fall to sustainable levels
This approach was forwarded by Dean Baker, co-chairperson of the Washington, D.C.-based Center for Economic and Policy Research. Baker explained that allowing house prices to drop to sustainable levels will increase demand for houses and reduce the number of foreclosed homes languishing in the market. According to the Standard and Poor Case-Shiller National Index, home prices across the U.S. are still more than 50 percent above their levels in January 2000.
Top post! I absolutely loved it, hope to read more posts like this in 2009! Merry Christmas and Prosperous New Year.
Well over 700,000 American families ( many of moderate income) have lost their homes in America because they were tricked into believing that they only had to make the minimum interest-only payment (ARM Negative Loan) but were not told that (due to the high interest rate) most of it would be deferred until it reached a point (in most cases after 2 or 3 years) where it got so high (and to the dismay of the homeowner) that there is no equity left in the home and the bank (after receiving several years of 10’s of thousands of dollars in minimum interest only payments) becomes the new owner of the home and the homeowners (many with children, senior citizens and those families who are taking care of their elderly parents., not to mention the suffering caused by this uprooting for the cat’s and dog’s who no longer have a home) are forced to hand over the keys & move out and it didn’t cost the bank a single penny.
Since I was 19 years of age, I was a proponent and attempted (back then) to convince U.S. Senator Jacob Javit’s to some how find a way to remove “In God We Trust” from the currency of our nation.
In my opinion, it should be “In Money We Trust”.
Our nation is based on Capitalism not God.
In my opinion, “The Change We Need” from President elect Barack Obama which I doubt very much he will do since he is a proponent of Moratorium’s which has been proven to only delay the unavoidable, is to federally mandate long term loan modification’s (interest) on behalf of “all Americans” with Sub Prime and ARM Negative (minimum payment deferred (home equity destroyer) interest mortgage loans at a fixed rate for 40 or 50 year’s to spread out the payments.
The majority of these loan’s (due to death, relocating of familie’s etc) would be paid off way before 40 or 50 years.
Leaving it up to the bank’s to do this is akin to putting the fox in the hen house to protect them.
“The Change We Need” must come from the Federal government.
This sub prime mortgage mess would have never happened if “We the People” who do not have high paying jobs would have been granted the right to borrow a low interest home mortgage loan based on income directly from the Federal Reserve Bank which should be nationalized for the moderate income working class people of our nation who for too long have been enslaved by bank’s and lending institution’s by high interest rates on money that they receive at a low interest rate from the Fed.
Our government will reap what is sow’s today and it would not surprise me that in the near future a 5th column in support of Al Qaida (“The enemy of my enemy is my friend”) will evolve within our own borders from some of the children of these American familie’s who watched our government bail out the bank’s & did nothing to help their parent’s from losing their homes to these very financial capatalist institution’s.