A Housing Bailout Proposal with some Promise!
Today I am going to provide you with some links to a Housing Bailout Proposal that may actually work!
For those of you that read my occasional political rants you might be surprised to find this one comes from a Democrat. Senator Menedez from New Jersey.
Am I missing something here? Here is the basis of the plan:
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The principal balance of the loan would be reduced to 95% of the re-assessed value of the home and over a three-year period, provided the homeowner is able to make reduced payments, the principal balance would be reduced in 1/3 increments per year.
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In exchange, the bank would receive a fixed share (at most 50%) of the increase in the home’s value when the home is sold or later refinanced. The share depends on how much the bank initially reduced the principal. For example, if the bank reduced the principal by 20%, they would receive a 20% share of any later increase in the home price.
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Home values would be determined by independent third-party appraisers.
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Two pilot programs would be established by the FHFA and FHA for a length of two years for homeowner acceptance.
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Homeowners are eligible no matter how far underwater they are.
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Homeowners who are in default or foreclosure are eligible, but they must make timely payments on the modified mortgage going forward or they will not receive any principal reduction.
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Primary residences are eligible, but secondary residences and investment properties are not.
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If capital improvements are made to the home, homeowners will receive credit for the appreciation and banks will not receive a share of that appreciation.
Now I think that this could be imposed on any government backed loan. My only suggestion is that it be made mandatory for banks that have received bailout funds to participate.
Apparently some banks have done this program and it has worked very well.
Here is a link to the TBWS Daily were I heard about the plan this morning.
And here is a Link to the Sentor's website with the plan.
