Since You Asked … Here's How I Would've Fixed the Fiasco

It is my opinion that to restore faith in our free market and help tax-payer/Home-owners defaulting on their sub-prime loans and not so sub-prime loans, we need to infuse these mortgages with new creatively designed but effective long term affordable fixed rate loans with needed funds. We would thereby also infuse confidence into the mortgage backed securities that have lost value. This move would help reduce if not eridicate the mortgage defaults, help families keep their homes, rekindle the housing market… and restore some confidence in and on Wall Street.

And last but not least… the American Taxpayers WOULD support this bail-out because it helps the middle class and real estate is the best investment for our hard earned cash… still!!

Lucie

"On the Bailout"

I e-mailed the following to all Senators on the Senate Banking Committee,and the two major Presidentioal candidates. To date I have 4 replys, none addressing the letter. There have been no replys from the presidential candidates. Possibly most Senators and the presiential candidates are overworked and we should reduce their work load on election day.

Dear Senator;

I have been following the monitory crisis and our Country’s attempts to find a solution to it with deep concern. I must say that I find congresses attempt to find a fair and equitable solution to these crises hopeful. It appears as if our Country is on the brink of an unpresenteted tragedy, and while the single unsolicited voice of a 70 year old retiree may be out of order; I never the less would like to offer what I hope to be food for thought as to our way out of this dilemma.

Let’s begin with the basics. It has been reported that our financial crisis is too complicated to allow the market to solve it on its own. We are told that Federal intervention is necessary. It may be too complicated to understand, but I do know that the only way to eat an elephant is one bite at a time.

I also know that every non performing real estate asset has or had a mortgage and a note attached to it, and that someone has to keep track of the borrowers payments or lack there of. Also, accompanying every mortgage is an amortization schedule whereby the first 5 years of the mortgage is primarily interest. Very little is paid toward principal. The last 5 years of the loan payment is mainly principal, very little goes towards interest.

Therefore, if we tax payers must get involved in this bail out I would suggest that rather than purchase non performing real estate loans outright from whomever, we conditionally make payments on these loans over a guaranteed 5 year period of time.

I am in hopes that this approach, using the original loan amortization schedule for the properties in question and making payments on them over a select 5 year period of the loan, just as the borrowers would have, will take less of our National treasure, provide liquidity to the markets, and give us additional time in order to work our way through this mess. After all if the borrowers of these foreclosed properties were able to make their payments faithfully and on time we would not be in this dilemma.

Secondarily vacant real estate, aside from being a hazard to neighbors and the neighborhood, is a burden to everyone concerned. Therefor if the mortgagors who have not yet lost their property to foreclosure can pay anything at all, I would make every attempt to keep them in the property. I would attempt to work out incentives whereby they could maintain ownership or some form of financial interest in the property during and after the 5 year period, provided they maintain the property and make their’ work out payments faithfully.

While the lenders should not profit from any workout, it is not beneficial to cut them off at the knees either. Their profit and executive salaries can be contingent on their ability, willingness and help in turning around these non performing assets over the 5 year period. By using the current amortization schedule for each property, interest can be adjusted, deferred, or partially waived, in order to affect a work out. Whatever works! In closing, I know you have a tough job ahead and my prayers are with you.

Regards,
John Trapalis