My resolution to the crisis
2007 – approx. 138 million individual taxpayers
Amount suggested for bailout $700,000,000,000.00
1) Outlaw ALL version of Adjustable Rate and Balloon type mortgages. They must all now be Fixed Rate.
2) Companies in Financial Crisis are allowed to fail. Bad business practices got them where they are and they deserve what they get!
3) Issue a rebate to all individual taxpayers in the amount of $5000. That is the $700 billion divided by the number of taxpayers.
a) If that person/family is in mortgage trouble then Fannie or Freddie refinance the balance of the loan for 35 years at a fixed rate.
b) The person/family forfeits the rebate in the amount of what they owe in overdue mortgage debt. If the amount they are behind is greater than the rebate the balance is added into the amount of the new loan. If the amount overdue is less then they receive the balance of the rebate.
4) This solution provides for laissez-faire (hand off) economics allowing companies to fail and succeed but puts the money in the hands of the individual consumer.
5) This solution also handles the mortgage crisis by providing fixed rate insured loans through federal groups thereby bolstering the economy by providing relief to the mortgage crisis.
And, when this is implemented, I will be appointed Emperor, and rule you all with an iron fist.
Obey.
The.
Fist.
Good ideas, Ben.
I am curious as to why you say no adjustable rate mortgages. I had one for a little while, and it got me a good rate. My payment was never going to go up, even if the rate got “adjusted” up. It would have just added to a balloon at the end of the loan. I never had to worry about that, though. Rates continued to go down, and I refinanced into a fixed rate. I was also planning on moving long before the 25 or 30 years was up on the adjustable, and I’ve done considerable work on the house, so the extra value I’ve added to the house would make up for any adjusting and ballooning. So for me, the adjustable rate mortgage was just a useful tool.
My idea for a good plan for the banks to save themselves is merely to foreclose the house, rent it back to the previous owner (at a payment the now-previous owner can actually make) and then sell the house at a more reasonable price down the line. Now the banks would be able to immediately offset some of the bad loans losses and weather the storm.
The government doesn’t need to be involved at all.
Bryce, those aren’t the type of adjustable rates I’m talking about. The ones that got us in this mess are the ones where the payments go up after 3 years severely increasing the amount of the house payment.
I do have to agree that your idea is a good one. If the government didn’t want to spend the money thats exactly the way I would do it. I would also ensure that the foreclosure didn’t go on the credit report because it’s not necessarily their fault that this has happened. With all the companies that did “dirty” loans it is hard to say who is at fault.