I have an answer the foreclosure crisis and a way to turn around the economy at the same time.
First, an outline of the problem: The old way of doing things with foreclosures have not changed. That’s the problem.
After a property is foreclosed, the bank lists it with (mostly) the same agents they have been working with for years. Newbies who may actually know the market are not invited…..but that’s not where I am going.
The properties are just thrown on the market no matter what shape they are in because the bank needs to get it off their books.
So, that makes the homes available to only a few buyers…investors with cash, not the ultimate home buyers. They end up paying retail after the cash investor fixes it up.
No, I am not against the investors making a profit, it’s just that there are too many homes and it makes no sense.
I know there are FHA 203k loans, but they are cumbersome, expensive and not available to all property or property types.
How about, Mr. President, making each property that is foreclosed by the banks fixed up to standards that an owner occupant can move into and finance properly.
Give income to the construction trades that are hurting and recoup the outlay when the home closes (with interest!).
What did we just accomplish? We gave people jobs, we moved property faster and for more money, we added to the number of mortgages in the system with quality property that made mortgage backed security investors happy and to top it off, we stimulated an economy with the taxpayers making money!
I know someone knows someone that that knows someone who can actually get this idea to someone at the White House to get this rocking ASAP (May 1, the day there is no tax credit would be good!).
Have to respectfully disagree with you on this one, more government mandates is NOT the way to fix this. Let’s keep the government out of it and come up with an alternative like the HEFI program or some fractional interest program where the bank can save face by cutting principle and make some of it back in the long run while giving the homeowner a payment for a house at market value.
Now of course I know what you are saying, if we are going to spend govt money, let’s be smart about it, but let’s not give them any new ideas, let’s just tell them to step away and let the market correct itself or the banks to become innovative
@Dean My ideas come after discussions with economists, Wharton professors, money mangers and highly respected politicians.
The basis of the economy along with the world wide capital supply does not allow for the currently popular rhetorical method of economic reestablishment.
The government is and must be a driving force to get an economy out of it’s doldrums. This has been true for every recession. Especially, this one that was so severe in combination with the power of a countries like China and Korea that have never threatened the US economy during an American recession.
To give an example, think of this as a line of credit. It goes up, it goes down.
I hope you see the point and if you would like, please email or call to discuss it further.
What if we simply paid demolition companies to demolish all of the foreclosed homes to create scarcity and rising pricing. This method also puts folks back to work in this industry, but uses the opposite approach. Solves over building too
Are you saying that the Government should buy up all these foreclosed homes from the banks, fix them up ala the New Deal and then sell them?
Certainly the banks aren’t going to sit still for a mandate to spend money. If they would, I’d rather they let some money loose for qualified borrowers or home owners that want to or need to refinance.
Unless, of course, I can be a GS-15 Realtor for the Uncle Sam Real Estate Co. with full Government benefits and leave.
I agree with Dean — the only weak spot in this proposal would appear to be the part where the government is put in charge. There is not a strong tradition of understanding housing among bankers or academic economists. From 60′s tenement projects to the modern mortgage crisis, American homeowners and taxpayers have been the petri dishes for a whole lot of government experiments in the past several decades.
Maybe it’s time to discuss fully privatizing the Federal Government and selling it to Berkshire Hathaway. They could, at least, afford it.
Repairing the economy and cleaning up the housing market are really two separate tasks. I agree that the government must be involved in matters of national economy, but real estate is a local issue, and, in my opinion, is not benefitting significantly from government assistance.
Here in Phoenix, one of the nation’s hardest hit housing markets, the market is very brisk, especially in the price ranges below $250K. Fix-and-flip investors pick up distressed properties and turn them into a market-ready product. They are effectively doing what you propose in your article, but with private finds, not tax dollars. Buy-and-hold investors provide rental properties for displaced homeowners who won’t be buying in the near future. And owner-occupants buyers do have a selection of affordable homes.
Reducing the number of foreclosures is the real problem…once these foreclosed homes hit the market, the laws of supply and demand are doing their job.
You’re advocating for giving up our freedom to the government in the hopes that they can make better decisions than we can. They tried that 100 years ago in Russia…and 50 years ago in Cuba. Didn’t work so well for them.
Because it’s the gov handling the improvements the best we could hope for is ADA compliance and that it meets code. Why not just turn the 8k credit into a home improvement credit, didn’t hud do this in the 80s to move inventory? Zero down to 100 down with improvement incentives?
To be honest, these are good ideas. I just personally don’t trust the government with money. It scares the heck out of me! If they can’t figure it out with the money they’ve already printed, more programs and more money can only make it worse. I’d like to see them take a step back.
Really? I’d say keep the government far, far away from foreclosures and short sales. The government has proven they cannot be trusted with our money. Even the banks gave the “bail-out” money back. I’m all for less govenment.
I’d say, let it run its course. It will get sorted out.
@Grant,
I actually called for that awhile ago on CNBC for new construction.
It is a logical add-on to my idea.
Someone has to do a market survey on each house to see which ones would get the rehab. We are not going to rehab houses so they will sit.
Also, I would like to see Fannie and Freddie expand the financing that they are offering for their REOs where you can get 97% with no MI for owners and 90% for investors.
All they are doing is transferring the paper to people that have great credit and income. But, they are blanking out others of similar situations from homeownership and recovery by making them go through mortgage hell.
If we can replace a Fannie Mae no-doc with 500 credit with a 95%, 750 credit score full doc but with 3% down and no-MI, aren’t we all in better shape?
Here we go, the CNBC interview:
http://www.youtube.com/watch?v=o3mc8_e2v9I