I'm sure that we all know someone who has been affected by the recent economic crisis. And while many signs point to recovery, the damage has been done to many families. Foreclosure is at an all-time high and has crippled the once strong real estate industry. Politicians, lobbyists, talk-show hosts, and even the average American has their own ideas about how to resolve this crisis. Many of them are good ideas, but they don't get to the real root of the problem, personal responsibility. In addition, I do feel that banks should share some responsibility in helping to change the direction of our economy. In the following paragraphs, I will detail my plan on how I would solve this dangerous crisis and help return America's economy to it former strength.
The first issue I feel that should be addressed is imminent foreclosures (either currently in progress or those that are within 60 days of proceeding) with the Mortgage and Financial Recovery Act. Many families have felt the sting of a job loss or lay-off. This in turn has affected their ability to pay their bills on time, including their mortgages. What I am proposing is a 6-month stay on ALL mortgages that are either currently in foreclosure, or in danger of foreclosure. This means that all payments and interest is frozen, interest rates are locked, and families will be afforded not only the opportunity to stay in their residence, but also the chance to remain there if they complete the Foreclosure Rehab program. The program consists of:
1. Required Financial Counseling by an approved independent financial counseling and planning agency (Financial Peace University, Crown Financial, etc.) This counseling will be partially subsidized by the government, but the homeowner will be required to pay for a portion of it according to their current income. This step will allow homeowners the opportunity to begin their financial lives again under better circumstances. Upon completion and verification of such a course, the homeowner will proceed to to following step.
2. Mortgage Arbitration. Every homeowner involved in the program will have the chance to renegotiate their mortgage with the bank. The actually amount of the mortgage will not change, but the terms of the mortgage will. Any Adjustable Rate Mortgages will be eliminated and set at a fixed rate, according to the homeowners current income. This portion will be opened to those who are not in danger of foreclosure yet, but are in an ARM and whose rates will no longer allow them to remain in their home. The arbitration will be performed by an outside firm at a reduced rate to both the homeowner and the bank.
3. Mortgage "Reset". Upon completion of these steps, the mortgage will reset to a non-late status with no fees and the homeowner will be responsible for the balance from that point forward. Also, the mortgage holder will NOT be allowed to impose any fees/penalties on ANY homeowner that has been involved in the program.
Second, on homes...