Interesting video just sent to me from a HREU Student..
Yes, some of the facts and opinions in this video are not correct…but, the overall theme merits conversation.
As you will soon learn, she is absolutely correct that the government seems to have lost focus on housing. I am hearing more and more politicians claiming our economy can fully recover without housing recovering.
In other words, there seems to be significant housing burnout in Washington D.C. Did President Obama even mention the word…housing…in his speech last week?
I know there is a significant segment of the real estate community that wants the government out of housing. They cry out to..’let the housing market self correct.” But, these are the same folks who will argue that there needs to be government sponsored financing..and a mortgage tax deduction. Fact is, we need the government to work with our industry to create a long term solution to help the millions of underwater owners.
Want the American Dream of homeownership to return in our lifetimes…lets work together to end the nightmare that has become the actual experience of millions of underwater owners. How many families will ever want to own a home again after experiencing a foreclosure?
How can the economy recover when literally millions of homeowners are underwater? As we reported last week its estimated that 40% of ALL homeowners with a mortgage..thats 20,000,000 ‘homeowners’….will be upside down in their mortgage loans if real estate prices drop another 5%. Also reported on this site were numerous studies from leading economists that real estate is indeed depreciating (as you read this) by at least 5%.
Do people feel more or less confident when they are underwater in their homes? The obvious answer is…less confident.
Proposed in this video is some sort of real…honest to God…loan modification program. We agree. Not like the half measures being experimented with now. We propose a refinance that removes the negative equity from underwater owners homes. We call this..the Radical Refinance. Allow underwater owners the opportunity to refi their homes are current rates, removing their negative equity. Make it so their lender has ‘warrants’ so that if the home appreciates the lender gets a piece of the profit. The longer the owner stays in the home the less the lender gets in terms of a percent of the upside.
Yes, that means some people will get rewarded for their bad behavior. Afterall, how many owners are underwater because they bought a home they knew they could’t afford…bought a boat with their HELOC money etc? I suggest that none of that matters now.
Fact is, we are all being harmed with each underwater owner. When someone is underwater they don’t spend..hurting the economy. Additionally, when/ if they decide to do a strategic default (or strategic short sale) neighboring owners homes are harmed.
Fact is, like it or not we are all in this mess together.
Watch this video and share your thoughts:
I believe that the deficit balance should be recorded as a silent second at 0% interest similar to the deed filed by cities for a BMR. That way the lender can insure that they get their deficiency paid by any equity gain, but must agree to a sale at Fair Market Value when the seller is ready to move on. A certified appraisal should be used to determine the FMV at both ends of the transaction. The homeowner is already gaining potetially hundreds of thousands dollars in the silent second. The homeowner should also be entitled to any principal reduction on the new first mortgage. Everybody wins in this situation except that the investors will not be collecting interest on the deficiency, but they are getting a much greater percentage of their principal returned including potentially the entire deficiency balance upon eventual sale of the property. These “geniuses” came up with all of these disastrous programs to get people into homes under false premises, they should be able to figure out solutions. Haha hafa…