There a many ideas being discussed everyday about how to solve the current foreclosure crisis. The President and his staff have worked on plans, Congress has worked on different plans, and the financial industry has worked on its own set of plans. None of the plans have seemed to make a dent in the crisis so far. The main reason given for the slowing number of foreclosures now is that there just happen to be less bad loans out there since so many have already foreclosed. I believe that the biggest reason we had so many foreclosure in the first place was because banks and mortgage companies placed so many people in home loans they could not afford if any type economic downturn occurred which, of course, it did occur. My solutions involve changing the structure of the home loans because I feel this is the most flawed area. It is based on a simple premise; homeowners can only pay what they can afford. To solve this crisis, I would like to offer three plans that have not been tried to date.
Plan 1 would be for homeowners who have gotten behind on their mortgage for one reason or another but are still able to afford their current mortgage. I would suggest that banks and homeowners make a new agreement to take that overdue amount and add it to the end of their current loan. Let the homeowners just keep up their current payment and let the banks report the loan as being up to date. At the same time, add a number of years, maybe with a maximum of ten, to the end of the loan to pay back all the accrued payments and interest that had been missed. This lets the homeowners re-establish their credit while still making sure that the bank gets back all of its money. In most cases, banks really do not want to foreclose on a property. This ends up costing the banks and the homeowners a lot of money. This plan sounds like a win-win situation to me.
Plan 2 would be for homeowners that still have a current income but cannot make the total monthly payment every month. The banks should sit down with the homeowners and determine what is the amount that can be paid on a regular basis to the bank. Then draw up a new agreement, or amend the old one, to make this new amount the mortgage payment going forward. Similarly to Plan 1, the new agreement could add on years to the mortgage to account for the unpaid amount. That way the banks would still get paid all the past due amounts with interest. The homeowners would be able to keep their homes with a payment they can afford. Sounds like another win-win situation to me.
Plan 3 is really just a new set of rules to qualify more homebuyers. This Plan would help the banks and prospective homebuyers in cases where the current homeowners no longer have a viable income and cannot afford a mortgage payment at all. The current homeowner would have to go through foreclosure but the banks would no have to keep the home on the market for too long.
Plan 3 would qualify more homebuyers buy adding a set...