Economic Stimulus, will own work if we keep families in their homes.

Many thoughts exist on the Economic Stimulus Plan, bottom line is if we do not stop the foreclosures, the madness will not end. Here is a basis for a plan and ideas can be added to this, it's a start, this is the short version: (rough draft) Also, to help people understand this. We have Banks holding $175,000 mortgages and these same banks are participating in short sales and selling those very same homes with $175,000 mortgages for $140,000 and, even as low as $100,000. Banks are losing upwards of 40% on a short sale...HOW can they not afford to make 1.75% over the long haul with $15,000 in points (advanced profis) over losing 28% to 43%. This is good for banks, this is good for "Main Street", may not be good for "Wall Street" But we MUST do everything we can to keep people in their homes.

•1)      Lower all mortgage rates for homes in foreclosure to 4.25% fixed. Fed pays each bank $2K to cover costs of mortgage modifications only

•2)      Anyone in danger of foreclosure or 90 days past due will be eligible (this could go to 180) (OR EVEN LONGER, The Goal is to keep people in their Homes)

•3)      Any late fees,  costs, will be added to mortgage amount owed (reasonable/with a cap, say up to $5K, banks are losing far more w/short sales)

•4)      If person does not qualify Federal Government will pay lender $12,000 in advance to lower interest rate to 3.25%

•5)      $12,000 will be allocated as follows: $2,000 for cost of mortgage modification. $10,000 for points (Fees paid to lower interest rate)

•6)      If the home is sold within 6 years and the seller has a profit. $10K is reimbursed to Federal Government

•7)      If someone does not qualify for the loan at 3.25% amortized then and only then..they can be looked at for a 2.5% fixed interest rate. Fed will add another $5K to the points.

We need to keep people out of foreclosure and in their homes.

How would this help, amortized over 30 years here is an Example, I also added 40 year amortization which is another option to lower that monthly payment.

Mortgage amount           interest rate       payment                             40 year amortization

$175,000                              7%                          $1,164.28                             $1,078.50

$175,000                              4.25%                       $ 860.89                             $   758.84

$175,000                              3.25%                      $  761.61                             $  651.95

$175,000                              2.5%                        $  691.46                             $  577.11

$175,000                              1.75%                      $  625.18

This will not save everyone..but we might be able to keep 500,000 or so Americans in their home and this goes to "Main Street" We are just not cutting a check to the CEO's of banks. At $17K per house (Worse case scenario) it's $8,500,000,000. A tremendous amount of money....but when we are talking a Trillion....can't we use less than 1% to really keep people in their homes? I know this may need to be tweaked. Maybe even do a 1.75% interest only rate for 5 years. Note with the advanced points..lenders still make money which gets Americans working again.

Note that if we spend $30,000 per house, that's still less than ½ of what banks are writing off in Short sales and people are still losing their homes...at $30k it's $15 billion...that said, $30 billion keeps 1,000,000 Americans in their homes and it could save banks from writing off $40 to $50 Billion in short sale mortgages. It also keeps Americans WORKING, working in Jobs, working for a better neighborhood, working for a better community....Note that in the 2^nd quarter of 2008 we had over 1.28 Million Homes in foreclosure, not everyone of those was an investor, lots of them were families. I believe with my plan or some version of it we could have saved some of those families. Even if we only saved 250,000 families..., how do you just say 250,000 families. Every plan we see is spending money after the family is foreclosed on...why not spend it early and keep them in the home? Could you imagine if $100,000,000 billion was spent on "Saving Homes"! That could be 6,000,000 families saved from Foreclosure.

Saying this doesn't make sense?.....Well....just giving money to the banks and saying we trust you does?

This makes the banks work for the money we're giving them and keeps people, families in homes. I don't say it's perfetc....our crisis is unique and will not end until we stop the foreclosures.

Thanks,

Gary E. Schraut, CCIM