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I have solved the National foreclosure issues-Please have Pres. Bush call me.

By
Real Estate Broker/Owner with RE/MAX Realty Centre

Currently we have many folks who are facing short sale/foreclosure who want to keep their homes but can no longer afford the new payments, so they come on the market as short sales/foreclosures.  With each one of these cases coming onto the market, the overall situation only gets worse for the person selling after them and in the big picture, the national economy which will have to "clean up" the mess.  So what do we do...

First, do the homeowners want to stay in their homes?  If yes, then we need to find out what can they afford monthly payment wise under an FHA program.  That is the new loan amount.  (Let me stop and explain a little more)  They owe $400k, we refinance them to a new FHA loan amount which they can afford, $300k.  (The new loan amount would have to be a minimum of 70% of the previous balance.) 

So now what do we do with the $100k short fall?  Instead of having a foreclosure to sell or a large short, the bank will be able to write the "bad debt" off their books and hold a $100k note.  When the people go to sell the home a later date they will still owe that $100k back to the bank.  Time will help the process.  Currently, it is a race to foreclosure.

So the banks get to clear non-performing loans out of their portfolio, the real estate market will be much more stable with 1/3 to 1/2 less homes on the market that are foreclosures or priced for foreclosures, and the tax payers do not have to pick up a huge tab on a loan bailout.

Comments (4)

Shawn Gerhardson
Waterstone Mortgage NMLS#186434 - Cambridge, MN
Top Rated Mortgage Professional
Hi Joe- It look like you put some thought into this however it sounds to me like you are just prolonging the inevitable by having them pay the note at a later date. If they move out in a year and don't have that much equity they will still have to sell for less than their home is worth and be upside down regardless. Maybe I'm missing something here :)
Apr 07, 2008 08:49 AM
Ryan Bretzel
Keller Williams Premier - Stillwater, MN
I agree with Shawn here.  It is a great idea but unfortunately I'm not sure how many home owners will really be in the position even down the road to pay back that much.  I think we are just going to have to wait this one out and get it over as soon as possible.  It will need the support of buyer, loan officer, and Realtor to try and make sure the buyer from now on gets into a loan product that they can actually afford.
Apr 07, 2008 08:55 AM
Kendra McCourt
Re/Max 100 - Waldorf, MD
I see where you are coming from, everyone. I have a seller who wants to keep their home, but the adjustable rate arm killed them, they tried to refinance but because the housing market dipped so low, they are upside down now. They have decided to jump into the short sale market. They know they are losing the home they have always wanted - but can't afford to keep it, can't refinance, can't even sell it to break even. They want to stay in the home, and maybe sell further down the road, when the market would be better. It is a sad situation all the way around. When one home in a community goes up for a short sale, or foreclosure - it kills the whole area. Sellers who might have been able to weather this storm with the equity they have now can't because of the falling prices and values. God forebid if an owner who has always kept up on payments falls on a tough time, they are doomed. I doubt a government bailout of any kind will help the real people affected by this. It will only help those that "work" the system. I hope for everyone's sake we can figure something out to protect what people have invested their lives in.
Apr 07, 2008 09:06 AM
Joe Buffington
RE/MAX Realty Centre - Olney, MD
GRI, CDPE

Shawn I agree that it is flawed if they have to sell in a year or even 3.  However, lets say they stay in the home for 7 years and the prices come closer to 2005 levels, plus they pay down the principle and maybe even saved some money. 

My fear is that the pace of new short sales and foreclosures is pushing values so low, so fast that many non-short sale/non-foreclosure properties are racing towards short sale status.  If there is any way to slow the flow, the better.

Apr 07, 2008 09:55 AM