A Solution To The Foreclosure Crisis: Stopping Urban Sprawl

1237 words - 5 pages

The truth is there is no simple solution to solving the foreclosure crisis, but there is a way to alleviate the crisis by creating the right incentives. Neighborhoods should have the option of using the policy of “Community Buy-Back.” This policy is one that I thought of and it is something that I see as working very well in common practice. People know that foreclosed properties lower surrounding properties values. No community wants their housing values to go down, so why not sponsor a community take back program? In this program if one house was foreclosed the community has the option of paying for the property through payments each month, like most people do to pay for their mortgage. Instead, it is the entire community mortgaging the property. Opponents may argue, why would someone want to pay for a mortgage for a house that they do not own? Well the foreclosed homes bought by the community would be used as the community wishes. It could be turned into an inn for when family and friends visit. It could also be used as a party space where people in the community could rent it out. In the end, the community might be able to turn this foreclosed property into something profitable. A way to further this profitable nature is to have the U.S. government offer to pay twenty percent of the payments per month of the foreclosed property. Banks will mortgage out the property at its foreclosed priced value, not its actual value.
To further prove the profitability I will use math to explain my idea. Say there is a $300,000 home that recently foreclosed. The bank is unable to find a seller by offering it for $200,000. The community decides to buy it from the bank, through mortgage payments for a $200,000 equivalent home for 20 years. The total cost per month for the community is about $1,500 per month. The government offers to pay twenty percent of the mortgage or $300, so the community only has to pay $1,200 per month. Hypothetically speaking, there are thirty homes in this community. Each home then splits the price and pays $40 per month. The value of the homes in the community then go up because there is no longer a foreclosed property and the $40 per month will seem like a bargain for how much it benefits the community. The price can be further reduced through using the property as space that can be rented out for special occasions or used as an inn for family, friends, and neighbors. Speaking hypothetically again, if the house can be rented out for $20 an hour or $50 a night, from its 10 hours uses that month and 8 nights it is used, adds up to a total revenue of $600 for the community. This means that the community can redistribute this profit to the rest of the community so that each home in the community gets $20 and the actual cost becomes only $20 for each house in the community. It is a complete bargain, but it accomplishes so much.
Think of the effects of this legislation. Communities will start to buy the foreclosed homes in...

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