What have we done? The Fed is doing everything possible to introduce more liquidity to the capital markets but that is not enough. Now Congress [primarily Democrats] are asking for a temporary stay on Fannie Mae and Freddie Mac mortgages in foreclosures, but will that be enough? In my opinion no, because if the individual was not able to afford the house then how will they afford the house after the stay. We are basically inessence holding off the inevitable. What can we do? How can this industry find its footing on solid ground and begin moving forward? How can the economy restart itself and begin to push forward towards righting this ship that has gone astray? In my opinion, 40 year mortgages and/or mandatory refinancing.
Here is my theory, many of these homeowners were put into mortgages that they were unable to afford or purchased homes that exceeded their individual incomes by upwards to 5 and 10 times their individual salaries. I think that we should force everyone in a high interest rate variable mortgage into automatic fix rate and add up to 10 additional years max to get the payments down lower. In addition guarantee a percentage out of each payment will go towards the equity in the home to ensure that the homeowner is still allowed to build some equity. To qualify for this program one must be gainfully employed behind by at least 2 months in their mortgage and if they are in a high credit card and/or auto loan debt willing to have the debt refinanced to the point where if necessary they are given a new more affordable vehicle and forced to give up credit cards in order to receive lower favorable rates. Finally each individual will be required to go through a financial workshop that will teach them how to save, pay bills, balance a check book, etc.
Now one may think this is not in the interest of the homeowner and the banks will win because of the potential to receive more money in interest payments, but I beg to differ. Now what will happen is we force individuals to get more conscience about their finances while allowing them to be able to keep a quality roof over their head for them and their families. Secondly, it will potential help to increase deposits in banking institutions which will help begin to re-stablize the balance sheet. Next it will actually force banks to be more responsible regarding interest rates rendered, lending practices, and foreclosure proceedings. It may not be the final solution however it will be better than what is happening now which is nothing. This too will help individuals begin moving money into banks and financial instutions as confidence in the equity markets increase. The alternative will be to allow for banks to not lend money [because there is no money to lend] and allow for the rug to be pulled out from underneath our financial system.
The final suggestion is for Congress to pass a stimulus package that not only puts additional money into taxpayers hands however greater incentives for businesses to begin investing back into U.S. employee as a result of creating new jobs on U.S. soil at a good wage (not purposely under paying for a position that demands a higher skill level to save a buck). We need to put our employees back to work and look at reducing college education for U.S. citizens. The world is passing us by fast and we are doing nothing to plug this drain hole...
Let's wake up America
