Are Foreclosures Good For America? Part 4 by Bill Roberts
Everyday there are more mortgage defaults filed. The banks are suffering. Congress can't get their act together. A solution seems to be elusive.
The Secretary of the Treasury went up the hill to ask Congress for 700 Billion dollars to solve the problem.
Congress said NO.
But we still need a solution so here is my contribution to the discussion:
We need a new Resolution Trust Corporation, but this time with a different imprimatur: SAVE THE HOUSE, not sell the house.
It is clear Congress doesn't want to give the $700B to Hank Paulson but the crisis still needs to be dealt with.
It is also clear the people don't want to bail out Wall Street, which is how the media has characterized this rescue plan.
But buying mortgages from banks at 50 cents on the dollar is hardly a bailout. The banks have been duly chastised and punished. What more do you want?
If a new RTC gets your mortgage for 50 cents on the dollar then they could "restructure" the loan to more fully reflect the actual value of your house. They could "convert" your mortgage to a thirty year fixed at an attractive interest rate. Maybe then you would be willing to make the payments.
The RTC could also make all these loans FULLY ASSUMABLE. That would help you to be able to sell your house, if that is what you want to do.
All in all, a new RTC could bring stability to the housing market which would have a positive impact on the entire economy.
We Win!
When all is said and done and the final accounting of the cost of this program is determined, we will find that it actually paid us to do this rather than cost us.
Bank failures would stop or slow way down, foreclosures would almost disappear altogether, home values would stabilize, property tax revenues would return to normal, and Federal tax revenues would increase with a "rising tide" of economic activity.
And the new RTC would probably make a small profit.
See also "Are Foreclosures Good For America? Part 3"
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I have been a real estate broker since 1975. I specialize in commercial real estate, business opportunities, and finance. I coach real estate investors and teach retirement strategies. DRE #00527512
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Bill, your RTC proposal is interesting. Sometimes the best way to save money or make it is to stop loosing it. Bottom line, bailout as it stands now or not, is this...there's still a huge underlying problem and we still need to fix it. That fact hasn't changed one bit within the past 24 hours. Here's hoping that our congress is also listening to the people about their solutions to help resolve the crisis. Many heads are definitely better than one in this situation.
Lola, We can only hope they do listen. Thanks for stopping by.
Bill Roberts
Bill - The last RTC that we had to implement actually made us money I believe in the end. Unfortunately there was a Bush involed in both of the recent bank fraud bailouts.
John, OK, What is your point? I wasn't talking about bailouts or any of the Bushes.
Bill Roberts
Bill - The point is that an RTC response has already been done once. It worked but it took its toll on the taxpayers. It might work again. The problem is until we stop the problems that created this mess it will keep happening. Neil Bush was convicted and it didn't stop brother George from causing it happen again did it?
John, You sound like a Democrat. It was under Clinton that the CRA was expanded and promoted to extend homeownership to the urban poor. It was Clinton that appointed Greenspan, It was Clinton's man, Franklin Delano Raines that ruined Fannie Mae. We aren't looking for who to blame, but rather how to fix the problem.
Bill Roberts
Bill we can't fix this country because everyone is distorting the truth for political gains. I am a conservative democrat who sees that there are far too many people on both sideds of the aisle responsible for this mess. Neil Bush cuased the first home ownership credit problem back in the eighties. The Keating Five which includes John McCain had a hand also.
John, If we stop looking for solutions then all is truly lost. I continue to be optimistic about our future.
Bill Roberts
Bill I agree with you we must find a solution. I thought that both Republican and Democrat congressional leaders said they had reached one. Even McCain and Obama thought we had one. Maybe now that the grandstanding is over we can try it again. Thanks for letting me share!
Bill,
I like solutions:-) I like to think a country of entrepreuners equates to a think tank of solutions.
Question: What if we had the states give homeowners back the overinflated real estate taxes they've been paying the past few years?...as a start,.
Bill, Yes...keep the ideas flowing! Change needs to happen. I like the idea of making loans assumable and unwinding the mortgages so true solutions can happen. So many people are stuck on what has already happened - now we need to pull up our boots and move forward.
I agree that all loans should be assumable. Currently all FHA and VA loans are assumable, and the borrower must credit qualify with the current lender. However now that the government has taken over Fannie/Freddie they should modify those loans so that all are assumable as well. I co-founded a company called HomeAssume.com that matches buyers and sellers with assumable mortgages. In today's market this is a more viable solution than a "normal" real estate transaction and saves both parties thousands of dollars.
Check out this posting I read a couple of days ago:
http://sandiegopreviews.com/2008/09/29/lets-resurrect-assumable-loans/
'Becca, For the most part homeowners can (and should) appeal their assessment for tax purposes. If they had done this as values started to slide they would have paid less tax. The ball is in their court.
Bill Roberts
Karen, when I say "assumable" I mean really assumable, not subject to credit approval from the lender. If the lender can say "yes or no" to the assumption then it is just as if the loan isn't assumable at all. To make the process work the lender should have nothing to say about the assumption.
Thank you for chiming in.
Bill Roberts
As one of my clients said, "The world has changed." It has, and we need some sweeping changes injected into the financial markets before the economy can begin to recover.
Norma, If you think the world has changed and we need to inject changes into the financial markets just what do you have in mind?
Bill Roberts
Good idea.
My first job when I came to San Diego back in 1993 was working for RTC in the old Homefed Bank building in downtown San Diego. I spent six months there helping them have a fire sale on "distressed" properties.
Russel, Thank you for commenting.
Bill Roberts
Bill and John,
We all agree not to point fingers at any one political party, but how about pointing fingers at both equally. More to the point, we hired Congress to do a job and they consistently failed. Let's start by firing them all, regardless of party affiliation. I am a libertarian, but I'll take anyone who can do their job competently and be happy to call them by whatever name they wish.
I just don't get why we don't fire these people. It is funny that they have us all so wrapped up in party loyalty so as to divert us from holding them accountable. If they were treated just as employees of the people (which is exactly what they are) instead of Republicans or Democrats, they would have all been fired by now.
It is a grand shell game and we are the fools.