Okay- call me simple but i have an idea- well maybe it's more of a dream but here it goes... the decline in the real estate market is based on a myriad of issues. One main issue is that they have really tightened up on giving any Tom, Dick, or Harry a mortgage. This actually is not a bad thing- all the 100% financing, no income verification thing was getting WAY out of hand. This, of course, is one of the reasons why foreclosures are out the roof.
Anyway, my idea is really more for the family who make a nice living but has a big mortgage and too much debt (credit cards, medical bills, taxes, etc...). With the economy, gas prices, and food prices many families are in over their head, especially self employed people. These crazy credit card companies are certainly no help- one minute late and they practically triple your monthly finance charge!! Mortgage companies are expecting prisitine credit reports and a hefty income in order to approve mortgages and refinancing at reasonable rates. (I know- it's not their call and I'm sure they would LOVE to be selling more mortgages.)
My idea is this: Assuming credit is at least "FAIR" and the income is sufficient to pay for the new mortgage, - whatever that may end up being, and that they are paying their bills on a regular basis but struggling and feeling on the verge of getting to the over 30 day late thing but not quite there yet...give them a mortgage based on the following stipulations...
-obviously, their income must be adequate and stable in order to pay for the new loan
-all credit card debt and taxes are to be paid at the closing table and cards to be cancelled
-credit report will clearly state some sort of verbage that shows that the consumer has "filed' for this special financing (making it so that no revolving credit is to be issued for a period of time -say 3 years, for example)
-no ridiculous interest rate- c'mon let's try to give these people a break.
Now, unlike a bankruptcy or those credit "help" companies this is a bit different. All the debt would be paid in full- no special reductions in interest or balances would be needed. The credit report should IMPROVE. The only detriment to the consumer would be that credit cards would be restricted for a certain amount of time- whatever amount of time "they" deem adequate. This type of loan would allow people to retain their homes by refinancing- special notice given to the fact that these people were just about hanging in their with the silly interest only loans and high revolving credit debt. They most likely are a good risk and will be paying less per month. Also, for those willing to downsize and buy a less expensive home (if they're lucky enough to sell the one they're in) would be able to do so without the lender saying that they can't get approved because they're credit isn't up at 700 or more. Meanwhile they've been paying a larger amount each month than they would be if the lender would just approve them for a lesser amount!! Does this make sense to anyone but me???
So to sum it up... make enough money to pay for loan, credit and tax debt to be paid in full, restriction on future revolving credit, lower total monthly payments, happy, financially relieved people who will help to get our economy back on track!! Please feel free to comment- I'm a real estate broker and have only some knowledge about the banking/mortgage industry. I just thought that this idea would possibly help to trickle down some relief for people- realtors, lenders, builders, and the hard working people we all need to survive in our businesses!!