A Viable Homeowner Bailout
Every time I turn on the television, I hear about how angry people are that the federal government is spending TRILLIONS of dollars to boost the economy and how awful it is to be sending money to the banks who caused the problems in the first place. Without going all political on you here - though I most definitely have my own opinions on the subject - I did read one interesting and viable solution to the problems with the foreclosures in the housing market.
John Watch of AccuriZ The Science of Valuation said Franklin Roosevelt called it a Lend Lease program, but here’s how it works (in John’s words):
• Mr. and Mrs. ZZZZZ have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest).
• The ZZZZ’s lose their job and can only pay $470, so the government pays the difference of $700
• So the ZZZZ’s remain homeowners and work through their problem. It takes the ZZZZ’s 10 months to get back on their feet, the government paid out $7,000 and now the ZZZZ’s owe the government.
• But the government says okay, you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.
He added,
This program is not perfect, but it can assist a lot of people who want to own homes. Most importantly, it is channeled directly to the property owner, not a large corporation that has other motives besides keeping the property owner solvent.
I can see how this will help homeowners today. I think of my friend and her family who’ve been unemployed for a year now and know they could easily come up with a house payment of $500 instead of the $900 they are paying now. If they had two years of help (capped at $50,000 as suggested in the post), they’d be that far ahead still on their own home and could start paying back when they get back on their feet - the seven year delay to start paying back is genius.
Read his entire post because there are further benefits of this suggestion (job creation!).
Photo by leedsyorkshires via Flickr Creative Commons.
July 21st, 2009 at 11:26 am
[…] Another solution can be assistance in the Foreclosure process as reported by Kathy Tyson of Banks.com “A Viable Homeowner Bailout”. …… […]