I can provide a solution to the foreclosure crisis with a two part plan that will provide increased home equity and employment. The plan provides loan modification opportunities, financial rebates and new jobs in infrastructure construction and alternative energy resources.
There are many flaws with the United States current plan of action and it all begins with our president’s $650,000 program. President Obama’s Mortgage Relief Program is aimed at helping stop foreclosure by lowering monthly payments. Lowering monthly payments seems to be the governments first and easiest option in helping those affected by the economy. Low payments produce homes with negative equity and many people whose homes were foreclosed upon had high negative equity and will not pay, even if they are able to with the new lower payment options. One of the major faults of Obama’s program is eligibility requires the monthly payment to be 31% of their income or lower, but this will not help many people because those whose payments were at 38% of their income or less did not experience high foreclosure rates according to Stan Liebowitz of The Wall Street Journal. The other qualification is that the person needs to have enough income to make the loan payments. Most loan holders who have enough income are able to pay their debts.
This first part of my plan is a federally funded program The Increased Equity Initiative. This program is designed for owner occupied residences and fixed or currently income diminished households. The first stage of my program begins with a reward for future homeowners who put a down payment of $1,000-$20,000 on a house. The government will match the down payment as equity of the same amount in the house. One part of President Obama’s plan that I do agree with is the $1,000 a year for those who pay all of their mortgage payments on time, which I believe should go into the house as equity.
The drastic increase in foreclosures is due in part to homes that had negative equity. Liebowitz’s reported in the July 3, 2009 edition of the Wall Street Journal on the results of his study using the loan-level data from McDash Analytics. This data covered more than 30 million mortgages and it was analyzed that “12 % of homes had negative equity, they comprise 47% of all foreclosures.” The new program will encourage people not to walk away from their houses. Those households that are experiencing diminished income because of unemployment or a pay rate decrease would be able to apply for loan modification benefits. A modified monthly payment of 31% of their current income would be determined. Many people, due to disability or retirement, cannot afford to pay the mortgages on homes they have inhabited for a majority of their lives. This 31% loan modification program would also be available to those on a fixed income. Another way that equity will be increased is by changing the ratio between the amount of interest vs. equity that a home owner pays on their...