We did not get into this mess overnight and we will not get out overnight but we are in the perfect storm and it is time to throw out the sea anchor before the ship sinks!
First, we have to face the fact that our economic problems are systemic and will take years of smart restructuring to work out. The basic problem is after years of the scam a.k.a. "Trickle Down Economics" we have eviscerated the middle class along with the well paying, mid level and blue collar jobs that created it.
The housing crisis is the trip wire that has started us on this no brakes ride down the steep hill and the first order of business is to slam on the brakes. It is not a long term fix but slowing it down will give us breathing room to focus on the systemic problems.
My solution is simple.......and instead of flaming it for technical reasons take a leap of faith that if there were a will to implement it, the details, legal and otherwise could be worked out.
The Plan:
- Every mortgage payment in the US on a primary residence is put on hold for a period of 6 months (at the sole option of the homeowner)
- Every foreclosure on a primary residence is suspended and the loan made current
- All payments, either in arrears on the mortgage or the 6 month going forward period are added to the end of the mortgage. (i.e. if you took the 6 month option and you had 20 years left on your mortgage you would now have 20 years and 6 months left).
- All mortgages on primary residences are immediately converted to fixed rate with an interest rate not to exceed 5%.
Does this solve our structural problems no, but it will stop the slide dead in it's tracks, keep people in their homes, restore confidence and terminate the financial crises.
Sure after the 6 month period there will be homes that still default but I suspect the number would go down by 75% - 90% and be manageable.
A simple response to a complicated problem the old KISS principal.