Yes, I know, if the people who got us there cannot work it out how to save us, Nick why do you think you know how to solve the housing and banking crisis. But that may be exactly why. I look at it from the outside and with street sense.
So let's recap a minute some of the problems.
- Mortgages that no one knows what they are worth!
- Homes that are upside down, the owners owe more than they are worth!
- Lack of funds for borrowers
Every bank with foreclosure and short sale inventory knows at this stage from the statistics what they are earning overall on average from the homes that they are selling, and therefore know the value of the mortgages they hold. For example, if the home has a mortgage of $300,000 and they sold it for $200,000 it is worth 66%. So taking this information from each and every deal from each and every bank and crunching the numbers will allow us the people to know several things.
1 What houses are worth!
2. What the mortgages are worth!
If we know this, we know what to pay for homes and these so called "worthless mortgages". Rather than constantly pumping money and funds into the economy which is not making its way out of the banks, who all they have done is give themselves big fat bonuses and a pat on the back and tightened the requirements for those borrowing money so that it flows less and less. Next they will be complaining that their profits are down because they can't lend as profitably and they need another bailout.
However, I digress. by knowing the overall value of these mortgages, they can be bought and traded with a one time or ongoing auction at this stage. Either the government can in one enormous deal buy each and every mortgage at a discount below the average value or they can be traded. Yes, it will mean that there is a resetting of the bar, a lot of people are going to lose money, but that is what is required and it needs to happen quickly, this problem is only exacerbated by how long it is being drawn out as the bankers keep saying they have no idea of the value of the mortgages. They have a very good idea, or how else do they know when to sell a home as short; and they are only making the situation worse.
It may very well be that it needs to be taken out of their hands so short sales can actually be quick and not long drawn out stressful deals. Maybe I am oversimplifying this problem but it is not hard to fix if you are not greedy.
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