In February 2008, I wrote what I felt was the answer to the mortgage crisis. This was actually written by me in August of 2007 but not published in AR until February. I tried and tried to warn members of Congress but did not hear from anyone. In September 2007, my wife and I took a vacation to Washington DC and went to the Russell Building where I talked to several aides of Senators about the mortgage industry.
In August of 2007, Then Senator Obama said on the campaign trail that the root of the mortgage problem was the mortgage broker/Banker who made these loans. I said it then and I still to this day say, Brokers and Bankers ONLY do the loans that the Lenders give us to do. So, to make a comparison that everyone can understand, to blame Mortgage Brokers and Bankers for the mortgage industry problem would be like blaming the car salesman down at the Ford store for the Pinto.
Back in February 28th I stated:
The solution to the problem is pretty simple. I have a solution to this problem and it is simple. Refinance every one you can into an FHA with the following criteria:
1. The only credit to be checked is the home mortgage. It needs to show paying as agreed for the past 12 consecutive months. No other credit needs to be considered. A single bureau can be used to justify this, thus holding the cost to the applicant.
2. No appraisal needs to be completed. They want to stay in the home so it must be of some value.
3. Check they are still employed or still own the business. Income and Debt ratios should not matter if they have been paying this on time.
4. Limit the income that the mortgage broker/bank can earn on the loan to 3%. This includes origination, yield spread, service release premium. All fees must be exact. No broker junk fees or overages. All fees paid by the borrower have to be supported by an invoice by the company.
5. Allow all fees to be rolled into the loan.
6. Mandatory escrows for taxes and insurance. Any pre-paid item can be rolled into the loan.
7. Increase the MI factor from .50 on FHA to .75 to be fair with the Mortgage Insurance Companies.
By doing this, these families could refinance from 11% or more loans to FHA loans in the 6.75% range, lowering their payments by some $350-$400 per month. Now what kind of an economic stimulus package would that be to America?
What do we do with the 1000s who are past due on their mortgage and about to be foreclosed today? I would recommend that the mortgage service company get with the PMI companies and waive deadlines. Try to work with people who want to stay in the home.
Mortgage Companies should re-evaluate peoples mortgages to see if they are in fact over valued. Many times, a simple adjustment to the note can be done to lower interest, thus lowering payments to the home owner. Then they stay in their home and everyone is happy.
I always heard that a win win win solution was always the best for everyone.
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