Politicians are thinking of ways to fix the housing crisis and most are focusing on the interest rates the home owners are paying. I don't think that lowering the interest rate is going to solve much. These people are in trouble because they are "upside down" on their homes - meaning they over paid for them and now their homes are worth a lot less than what they paid. I have a drastic solution that would be the perfect way to spend the "stimulus" money.
Home owners in a serious "upside down" situation should be able to pay for a reputable appraisal of their property. The lenders should then be able to determine what the real value of the property is. They would then offer a new loan for the true value, plus an added margin -maybe 10% (because people who make bad decisions shouldn't get off scott-free) and perhaps offer a fixed rate if they previously had a variable interest rate. The stimulus money would help the banks finance these transactions that would ultimately help the tax paying home owners.
This way, the home owner will no longer be so far upside down so as to be hopeless enough to abandon the property, and the lenders will not be stuck with a foreclosed property. This should also help stabilize the housing prices more quickly than waiting for the foreclosed properties to sell at drastically reduced rates and then slowly raise up to what should be a normal level.
Done correctly it would be a "win" situation for everyone involved.
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