Solutions

So I realize while writing the last post I'm no better than the people who play Monday morning quarterback. Where are my solutions? I'm complaining about the world but what would I do.

I'm not Harvard educated economist. In fact my economy teacher in college said I wouldn't amount to anything. Maybe that's where my chip for the people are supposed to know and solve our problems come from. Economics are fluid. No one problem is the same as another. We can learn from the past but there are no exact fixes that apply to every situation. If that where true, we'd just need to start a war because that's truly what got us out of the Great Depression years ago. Wait, we are in a war...what, we're in fact in two wars? Oh, well...um.. maybe War isn't the way out or at least these wars. We're in multiple wars and we (the average person) is asked to sacrifice NOTHING. When we go to bed at night the furthest thing from our thoughts are the young men and women dying for us.

We might be able to solve our debt problems in a matter of months if we where to stop the major campaigns of both Iraq and Afghanistan. I hate to sound to simplistic but I don't see the bang for our buck. Most of the terrorist threats that we've been told that we've captured have been on our soil lately. I haven't heard of any plans that we've disrupted from over seas. Are we really fighting them over there so that we don't have to fight them over here?

Anyway, what would I do. If I had ultimate power, one of the first things that I would try is to put this TARP money in the hands of the borrowers and not the lenders. Recently the lenders where told that they where going to have to start lowering the principal owed on the loans. This is the last thing the lenders want to do. Even though they might be upside down on Loan to Value, they're hoping that one day the values will rise and they'll get their money back. They'd actually rather loose money on interest than they would on principal. Let's be real here. The banks where just as much of a culprit on the inflation of prices as anyone else. They allowed stated, 100% LTV, low FICO loans. The lenders where competing with themselves to produce more and more and make as much money as they could which meant the rise of prices would keep them making money the easiest and fastest. They weren't really lending their own money, they where putting it together and selling these unknown and unproven assets on the stock markets.

So screw the banks. Put this TARP money into the hands of the borrowers. Figure out, in very similar ways that they're doing rate mods, to see what it will take to lower the principal that people owe to get them at the 38 - 42% Debt to Income that the government feels loans should be at. By lowering the principal it will save the borrower on their monthly payment AND then make it much easier for them to sell their homes in the near future. They might even be able to make a small profit. Yes, it could be seen as the government giving away money but it will promote and allow for real estate movement in the private sector, not just foreclosing and shortselling people's homes to which only the lenders get to write off the losses. Write them off they are doing, it's very common for the lenders to now send the borrower's on a shortsale a 1099 for the difference of what they owe and what the lender actually got paid off. So you owe 150,000 on a house and it shortsales for 100,000; the lenders will send you a 1099 for that 50k difference. You're going to end up paying taxes on the 50k loss so that the lender doesn't. I'm sure it's more complicated than that but this is what the normal personal is experiencing.

Banks and investors would tell you that they'd loose lots of money on the principal, but I ask, how much is being lost on the the shortsale or foreclosures? How much money in interest and principal at the end of the day when a house sits on the market for six months?

This would promote sales by individuals and make it easier for them to get rid of houses on their own, really push people in and around the real estate business. They would spend more money and higher new processors and invest in their own businesses instead of not being able to pay for the bills.

Another thing I'd do is let knowledgeable people figure out helpful and sensible loan guidelines. There is a need for stated. there is a need for 95 or 100% financing. But make the more risky loans, not terribly worse in pricing but much more restrictive. There is no reason that that someone who qualifies with a full doc income and assets and huge FICO scores shouldn't be given the option to have a 100% loan. If someone can truly afford it, why not. What's more American than that?!

I think I owe it to not just complain, but to also bring to light the failures and possible successes that I see and think of. I'm getting tired and have a long day of fighting for my loans. I'm going to get a few winks but check back in. Let me know what you think we should do to fix and promote the real estate world.