As a non-traditional student, I am interested in finding alternative sources of financing for school while keeping up with my current financial responsibilities. As a homeowner, I understand many of the intricacies of available mortgage finance offerings. Today we are in a crisis that is hurting our entire country and affects many of our friends and families. As many know, it was a combination of reduced restrictions in the banking industry, creative financing options that sounded too good to be true and were, and the lack of financial education that put many people in situations they never imagined. I propose several tiered solutions to help this current crisis as it stands today.
For the homeowner that cannot afford their current mortgage because the rate has adjusted upward, this is a time for banks and financial institutions to realize that by helping the homeowner they are also helping themselves. By lowering the rate now, and even setting it at a fixed rate, they will continue to receive income. If they do not, they will find themselves with even more empty homes on their hands, many of which are unsellable due to the condition in which the previous owner has left them.
For anyone who has not visited a home that has been foreclosed on, my encounters have found them stripped of any and all removable items including every light fixture and sink, usually requiring paint and repairs throughout beyond cosmetic needs, and their doors or windows, if any, may have been left open to the elements and any visitors. This is not an ideal situation for a financial institution which must then pay someone to repair and restore the home to a sellable condition or hope they find a buyer with capital and a vision. If there is a current homeowner still willing and able to pay their previous payments or some agreed upon amount that is within reason, this is a win-win option.
Now I do not expect banks to be excited about losing the increased interest they were expecting, and I do not excuse the homeowner who had the opportunity to clarify any issues prior to signing their note or who clearly bought beyond their limits. I do propose a backend fee for this immediate rate reduction. Not enough to deter the honest homeowner, but something to acknowledge the financial institution is helping out and doing so at a loss, and the homeowner is responsible for trying to make up some of that loss. There are of course those homeowners who were greedy and got bit. And for those, I say, they should learn their lesson. But with the compliance of all parties involved, it is difficult to say who was at fault in each situation. So the backend fee is hard on some and not tough enough for others, but it lets us move forward.
In the case of a $250,000 adjustable mortgage at 8% where the payment has increased to $2500 per month including taxes and insurance, a reduction to a fixed rate of 5.5% will offer a more reasonable $2000 payment. The loss of $140,000+ in...