If the mortgage crisis isn't solved, then nothing will get fixed. It seems everything is connected to keeping more homes from going into foreclosure. There is a solution.
I am not an economist, but these day's you don't need to be one to put the country into the toilet, so let's call it even.
The way I see it, there are two big problems with the housing foreclosure problem. The first one is who are the home owners that would have never qualified to buy a home, in a home? These people need to be addressed first. Did you buy a home on a no interest loan, hoping to sell your home and then take the profit and flip your next home? The gambler ? Or, were you the 2nd type who would not have qualified under normal circumstances, but thought with a promotion or the kids moving along, and with both spouses earning an income, you could handle the full mortgage once the zero interest loan has expired? You are the homeowner that actually intended on living in your home, and took a gamble, but had a shot at it?
I am not going to go into the homeowner that lost his job, and is losing their house. That is not related to how we got into the housing crisis. Related, but different slice of the pie.
What if the solution was to identify the two types of homeowners that are either in foreclosure or about to go into foreclosure ? I think there is an easy way to help and solve this crisis. End the 30 year fixed rate. If you are in your home, and your zero interest loan has expired, or about to expire, and you are going to go from a zero interest only, to a 5% or 6 % loan and you can't make those payments, chances are you should have never signed on the dotted line. What did you think would happen? Or, were you gambling and hoping to cash in before the loan expired ?
What if, the banks were to offer a new term. 2 1/2 % 50 year fixed loan. This should separate those homeowners who actually can stay in their homes with splitting the difference , and extending the terms of the loan, and those who can't even make a 2 1/2 % increase house payment.
If the banks were to re-evaluate the home values, and offer a 2 1/2 % 50 year fixed loan, would you stay in your home? What if the bank decides to lower the value of your home 25% would you still stay? If not, let someone who can handle it take it over.
I think it's time for the gamblers to step up to the plate and admit they bit off more than they could chew, and figure out a way to get qualified people into homes.
Two years ago I kept looking at my house, and the homes on the street and I knew the values were exaggerated. It was just so weird. It did not matter to me, I had no interest in selling my house, and we bought it 10 years ago before the hijacking of the real estate market started. I just knew something was drastically wrong. I also took a good look at the people moving into these homes with $700 + price tags and asked myself , how is this possible? We struggle to make the house payment, the utilities, food, gas, insurance, and my gambling issues when college football bowl games start. How do they do it ? One works at a market the other works at a department store ? I could not figure it out. Well, we all have figured it out now.
I am sure my elementary observation on how to fix the housing foreclosure problem will be gone in the next hour, to make room for the next nincompoop , so be it. But , I think if we were to end the 30 year fixed, and replace it with a new 2 1/2 % 50 year fixed, we can solve this issue quickly, and make it fair to everybody.
Could it be that I am close and someone with qualified brain cells could put this out in a better way ?
P.S. I love RM on the tee vee machine.