Last night I went to bed a tired struggling Realtor and today I wake up a protesting college student. My last blog I thought, got it all out of my system. But I think I was wrong. Maybe because it is spring...
Any way here is my answer to the mortgage crisis. Take everybody that has a sub prime loan that is about to reset and finance them at the current rate. The criteria would be you are making your payments. Period full stop. This would not be a bail out . Since people would still be paying. What it would do is correct the problem of people being told do not worry prices always go up , that is a big fat lie, so you can refinance. I do not want banks to take writ downs. If you refi at 200,000 and your house is now worth 180,000 tough. You bought it. Bottom line is a home is more than an investment. It is part of the American dream. And as home prices do always trend up over the long term you will be fine.
Why is nobody proposing this simple solution?
Now I was a Wall Street Banker in a former life but I would like some confirmation on this. I believe if banks take the write downs and sell the properties in foreclosure they will come out better off than if they refi the good payers at todays rates. You mortgage folks out there can tell me if this is right. I believe this because financial institutions do make mistakes, but always act in their best interest. So I would like some one to tell me I am wrong. If I am right then the banks and institutions have so much more to be held accountable for. It means they are fueling this crisis to make up for their bad lending practices.
The PS is this. I want to be 100 percent clear that folks who are mortgage lenders are, and were not the problem, They were given these programs to sell. If they were not funded then they could not sell them So today we have regulators looking at the mortgage folks under the eye of the Fed. The Fed's eye should be focused on banks. The problem is The Fed chairmen does not shake hands with Mortgage brokers from North Dakota walking to his table in Faunces Tavern for lunch.
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