The economy needs a 1-2 punch to fix it.

First punch, we have to get Americans back to work by stimulating the economy. See http://www.stimulate-us-now.org to do that. It would take $700 billion from the pool of unspent TARP funds ($328 billion), the current stimulus plan ($590 billion uncommitted and unspent), and $800 billion bailout funds that are sitting idly at banks waiting for the next crises, and put it directly into consumer spending, which drives 70% of our economy. Every American 18 and older would get a $3000 prepaid credit card which must be spent in 6-months, because the card would otherwise expire. Consumer spending creates jobs, jobs create consumer spending, and both generate tax revenues.

Once we stabilize the economy and get millions of Americans working again, we do the second punch and implement Dan’s plan. Give Americans a chance to even pay a mortgage with the SUN Plan, and then find a way to make their payments meet their budgets.

I guarantee that this would work!

Dr. Jack A. Scott
Small Business Owner, Cavs Season Ticket Holder and Concerned American Citizen
http://www.stimulate-us-now.org

There is ONE GUARANTEED WAY TO STOP FORECLOSURES…..SELL THE HOUSE.

THE PROBLEM IS NEGATIVE EQUITY…AND THE FACT THAT RENTING IS CHEAPER THAN BUYING AT CURRENT PRICES.

If a person has a home that they bought using little or no money down, or they recently (last 3 or 4 years) did a cash-out refinance at a very high loan-to-value, and now they are $50,000 UPSIDE DOWN, where is the value in struggling to keep this home?
You cant sell…and you will have no equity for the next 5 to 10 years.

Why not go into foreclosure or file bankruptcy and go a YEAR without paying ANY housing payments, then RENT for 3 years until you can qualify for another mortgage in a healthy market?

The ONLY solution to this problem is to ELIMINATE negative equity…PERIOD. “Write down” these loans….REDUCE PRINCIPAL and bring the housing market to equilibrium.

The housing market is totally stagnant because houses CANNOT SELL if they are upside down. HOUSES HAVE NO VALUE TO THE OWNER WITH NO EQUITY.

I did not understand the wisdom in the financial bailout. I was even more unclear as to why trillions would be provided to the same players that lacked the ability to manage properly in the first place. I was even more perplexed when everyone was outraged, shocked and seemingly surprised that the same players that presided before and during the crisis, would behave any differently in the bailout. If they were able=2 0to see that their ideas, philosophies, thoughts and actions were a problem, we would not have a problem. They think that what they did was fine and that it is the silly, ignorant, defaulting homeowners that are the problem. There is also a presumption in President Obama’s thinking. He presumes that the population in America will behave differently because of the crisis that we are experiencing. I think that unless forced, the general population will behave the same way they behaved bef ore the crisis to some extent, if allowed, because they think that the problem was the “greedy Wall Street bankers”. We have two critical segments of the economy thinking and acting the same way. They are purely self focused. This is a problem. Businesses will get funding as a result of the stimulus package not because they have goods and services that are relevant and needed, but because we are afraid to find the bottom, which is exactly where our actions have taken us. If those businesses lack the ability to self reflect and admit that they need to revamp their business or just get out of their business or that they are bad business people and need to give others a chance to perform, the stimulus will simply reinforce that which is not good, relevant or needed.

I think the stimulus package is to the economy as cancer is to the human body. It can kill the bad cells and stave off the growth of more bad cells for a time. However, if the root20of the problem is not discovered and dealt with, the cancer will return and it will usually be more resistant and potentially deadly and fatal.

K.Scott

There are two types of problem subprime loans, Adjustable Rate Loans and Payment Option Arm Loans (POA’s). The adjustable loans predominantly have 1 and 2 year adjustment periods. Many of these payments have already adjusted up or will shortly. POA’s allow the homeowner to select from 4 monthly payment options.

80% of the homeowners with POA’s are currently making artificially low monthly payments, opting to add principal to the remaining balance each month (Commonly known as negative amortization). This provides them with the most affordable monthly payment.

The POA’s are programmed to adjust dramatically at the end of a five year period. The majority of these POA loans are due to adjust in about 2 years.

There are three obstacles hindering these homeowners from refinancing out of their sub-prime loans. 1) Lack of income to qualify. 2) Current property values. 3) Their lenders inability to help them. Lenders are in a quandary when it comes to restructuring loans for homeowners. In many cases they lack the necessary expertise and/or ability to handle the volume. For most homeowners it’s hit or miss as to whether their lender will allow them to restructure their loan or allow the homeowner to do a short sale enabling them to sell the property.

When hit with an overwhelming dilemma, one in the likes of which you’ve never experienced before, may require you to re-think the problem and force you to approach it from a different perspective. Perhaps from a direction you’re not accustomed to.

To help homeowners remain in their homes I suggest a three step course of action.

First have Congress enact a federally sponsored Mortgage Credit Certificate (MCC). Similar to the program New Hampshire Housing Finance Authority developed twenty years ago for first time home buyers.

It could work as follows: Each homeowner would get a $6000 annual tax credit which could be used to offset $500/month of mortgage payments. This would enable the homeowner to qualify for a standard mortgage as long as the MCC was granted for at least 3 years. $500/ month equates to over $83,000 more in a loan a borrower would qualify for at an interest rate of 6%. Borrowers would have the option of lowering their withholding on their w4 forms and receive the additional income in their paychecks each pay period. Homeowners would use this to help offset their monthly mortgage payments or receive a lump sum come April 15th. It should last for five years. This will enable homeowners to become acclimated to the mortgage payments. First three years $6,000. $4,000 the forth and $2,000 the fifth and final year. The cost of the five year period would be $24,000. The total cost over 5 years to help save 5 million families from foreclose would be $100 billion.

Second: Most of the mortgages on these homes are upside down. (Homeowners owe more than the homes are worth). Currently FHA will allow a homeowner to refinance up to 97.75% of a homes value. Why couldn’t FHA expand the FHA Secure program and finance up to 125% of the homes value and charge a higher mortgage insurance premium (MIP). Even if the federal government paid to ensure the entire risk, it would still be cheaper than buying loans back after they become a foreclosure as the government is planning.

These first two steps should be enough assistance for many of these homeowners to refinance out of their sub-prime loans.

Third: If needed the homeowner’s current sub-prime lenders would now be in an enhanced position enabling them to reduce the balance of the sub-prime loan down to 125% of the homes current value making it possible for the homeowners to complete a refinance.(example: current sub-prime loan balance $300,000 current home value $200,000, 125% of current value =$250,000. New loan would be $250,000, sub-prime lender would write off $50,000)

Homeowners would regain control by knowing up front the necessary steps involved in which to re-finance rather than having to wait for an over burdened hit and miss loan mortgage servicer who may or may not approve the restructuring of their current loan. Homeowners get to stay in their homes and the tax payers would make out much better on their current investment of $700,000,000,000 (700 billion).