Dear Ms. Norton-
In all the talk of Tarp funds and Stimulus Packages related to housing there is a missing element. We need a special short term loan program addressing those who are struggling and underwater. The program should be designed to allow these people to refinance the full loan value at the current reduced interest rates regardless of the appraised value of their property. By simply reducing the rates many homeowners could stay in their homes without clogging the courts with bankruptcy proceedings. The program should be designed to help prevent people from walking away from homes adding to the foreclosure crisis.
The program would best be administered by HUD because the loans would need to be held or guaranteed by the government, as the loan values will, until the market stabilizes, be greater than the worth of the homes they represent. The advantages to a program of this sort are:
1. It would free lenders from existing "at-risk loans" currently on their books for which they are retaining (hoarding) excess cash,
2. It would treat at-risk home owners fairly giving them a break in their payments while, at the same time, they would remain responsible for their loan balances.
3. It would expedite the unwinding of the securitized debt instruments currently clogging the system. The current argument for not renegotiating the loans in these instruments is the supposed threat of the investor law suits (apparently the legal aspects of foreclosure preclude that threat. Illogically, it is better to allow thousands to loose their homes while the investors loose all their principal, than to renegotiate the terms.
4. It would help to more quickly stabilize existing home prices.
5. The proposal to amend the bankruptcy rules will clog the courts, a program of this sort could provide an expeditious work around for those who qualify.
The loans would need to be designed to address the possibility that the homeowners wishing to sell in the future may still be "upside down" and the Government will be involved in resolving the difference. I'm sure this risk could be addressed in the loan terms to minimize the government's losses.
Thank you for your time.
Amy Fisher, CRS
VP. Realty Group Inc.
35 Years Experience in the DC Market
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