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I saw a report on the news yesterday about the epidemic of home foreclosures in America. This sparked a conversation among my friends about the current economic situation. The usual political volleyball game ensued. Eventually, we narrowed our topic to one idea. An idea so simple, that we could not believe that we were the first to think of such a thing.
Does anyone remember the Bank Bailouts a few years ago?
In October of 2008, President George W. Bush signed the 700 Billion Dollar Emergency Economic Stabilization Act that was intended to prevent banks from failing. This was a very big deal. It was controversial, but most of us seemed to think it was the right thing to do. After all, the banks had gotten too big to fail.
Essentially, the American Tax Payers saved the banks from losing everything.
So now we are in a deep recession. The deepest since the 1930s. Unemployment is high. People (Tax Payers) are having trouble paying their mortgages. As a result, the banks are foreclosing these properties, and evicting those struggling people (Tax Payers) out of their homes.
People (Tax Payers) are losing everything.
Meanwhile, the housing market is not going anywhere. Houses are not selling. No one can afford to buy a new house in this economy. The foreclosed homes sit empty. The banks are making NO money on the empty house. The empty house falls into disrepair because there is no occupant.
Here’s our simple idea.
Why not review the homeowners loan? Why not write a temporary adjustment to the monthly mortgage payment? Make it something the home owner can afford, within reason. Then revisit the agreement six, twelve, or eighteen months later. Wouldn’t it make more sense to keep the occupants in their home, and continue to receive revenue? Doesn’t it make sense to keep occupants in the house in order to maintain upkeep?
Neighborhoods with even ONE empty house suffer from a decline in property values. Empty homes also invite crime.
I realize that there are millions of foreclosures each year. Re-evaluating everyone’s mortgage may seem logistically impossible. But how much more paperwork could it take to refinance instead of foreclose?
I also realize that refinancing is not the right answer for every foreclosure situation. But I believe if a homeowner has been paying his/her monthly mortgage payments without a major issue, then suddenly finds him/herself in financial straights, it would be in the best interest of both parties to avoid a foreclosure.
I’m willing to bet that the first bank to take this approach will become a national hero. There would be news reports. And the bank would gain millions of new accounts and make billions of dollars.
More importantly, after we bailed them out, don’t you think the banks owe us?
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