We all know that the bailout plan failed because the public is pissed off and would rather take a short-term financial beating themselves than reward the power elite who have been fleecing us for decades. The public is sick to death of trickle-down economics, and the outcry was just too loud for representatives to ignore.
So what does congress need to do? Congress needs to come up with a way of getting cash back into the credit market in a way that is fast and fair to the public. Here you go:
We should take the $700 billion and simply pay down the home mortgages purchased between certain dates, (let's say 2000 when real estate prices started going crazy and 2006, when they really started crashing). That's it. It's that simple.
OK, I realize it isn't that simple, and I anticipate some of the issues below, but first, let's look at how this solves the problem.
I did some poking around at the National Association of Home Builders (NAHB) website and discovered that there were roughly 26 million homes sold between 2004 and 2007. Now let's estimate that there were about 35 million sold between 2000 and 2006 (pretty rough estimate, but in the ballpark, I'm sure). Dividing into the $700 billion, that comes out to an average of about $20,000 per home. With an average home value of $200,000, that means about 10% of the home value. Are we on track?
What does all this mean? That means, if you bought a home for $200,000, the Bailout Commission writes a check for $20,000 that gets applied right to your mortgage. You paid $500,000, your mortgage holder receives a check for $50,000, etc... So the first result that happens is the lenders are all of a sudden flush with cash. They pay their obligations. The credit markets unfreeze. Financial institutions get back to business. (Hopefully not business as usual!).
Meanwhile, you're content, right? You may not have received cash to spend but your mortgage is reduced significantly. If you bought a home during those years you're probably still in the red, but not as much as before. So you'll still have to take some hits, but it will definitely soften the blow. You're less likely to foreclose and you feel more hopeful for the future.
OK, before everybody starts tearing the idea apart, I'll point out some of the potential objections:
1. Stop! It's Socialism! - Well, I guess it is. And there will definitely be some idealogues who will rebel against it. But somehow I think those objections will come from the people who don't get any benefit from the plan. I have a funny feeling that the 40 million families who get those mortgage reduction payments will be able to live with it.
2. That's not right... It's not fair! What about all the people who bought homes before 2000? - Are you serious? You've enjoyed 6 years of super-low interest rates and hyper-appreciation. And now you want this mortgage reduction payment as well? In the name of fairness? Please. And as for those of you who bought a home after 2006 when the market was already going down, well, I'm sorry, but that was just not too bright. You don't deserve a break.
3. I don't get it... It's too complicated. How do we figure out who gets how much? - We may need to come up with some fancy formulas, but I actually think it will be pretty straightforward. It's just a flat percentage of the purchase price of the home across the board for everyone.
What other flaws do you see with this plan? Let me know! And if everybody else thinks this is as simple as I do, let's push it on our representatives.
My disclosure: In the interest of full disclosure, I should divulge that I am among those who would benefit from this mortgage reduction plan, so I do have an agenda, but at least it isn't a hidden one. - 15437
So what does congress need to do? Congress needs to come up with a way of getting cash back into the credit market in a way that is fast and fair to the public. Here you go:
We should take the $700 billion and simply pay down the home mortgages purchased between certain dates, (let's say 2000 when real estate prices started going crazy and 2006, when they really started crashing). That's it. It's that simple.
OK, I realize it isn't that simple, and I anticipate some of the issues below, but first, let's look at how this solves the problem.
I did some poking around at the National Association of Home Builders (NAHB) website and discovered that there were roughly 26 million homes sold between 2004 and 2007. Now let's estimate that there were about 35 million sold between 2000 and 2006 (pretty rough estimate, but in the ballpark, I'm sure). Dividing into the $700 billion, that comes out to an average of about $20,000 per home. With an average home value of $200,000, that means about 10% of the home value. Are we on track?
What does all this mean? That means, if you bought a home for $200,000, the Bailout Commission writes a check for $20,000 that gets applied right to your mortgage. You paid $500,000, your mortgage holder receives a check for $50,000, etc... So the first result that happens is the lenders are all of a sudden flush with cash. They pay their obligations. The credit markets unfreeze. Financial institutions get back to business. (Hopefully not business as usual!).
Meanwhile, you're content, right? You may not have received cash to spend but your mortgage is reduced significantly. If you bought a home during those years you're probably still in the red, but not as much as before. So you'll still have to take some hits, but it will definitely soften the blow. You're less likely to foreclose and you feel more hopeful for the future.
OK, before everybody starts tearing the idea apart, I'll point out some of the potential objections:
1. Stop! It's Socialism! - Well, I guess it is. And there will definitely be some idealogues who will rebel against it. But somehow I think those objections will come from the people who don't get any benefit from the plan. I have a funny feeling that the 40 million families who get those mortgage reduction payments will be able to live with it.
2. That's not right... It's not fair! What about all the people who bought homes before 2000? - Are you serious? You've enjoyed 6 years of super-low interest rates and hyper-appreciation. And now you want this mortgage reduction payment as well? In the name of fairness? Please. And as for those of you who bought a home after 2006 when the market was already going down, well, I'm sorry, but that was just not too bright. You don't deserve a break.
3. I don't get it... It's too complicated. How do we figure out who gets how much? - We may need to come up with some fancy formulas, but I actually think it will be pretty straightforward. It's just a flat percentage of the purchase price of the home across the board for everyone.
What other flaws do you see with this plan? Let me know! And if everybody else thinks this is as simple as I do, let's push it on our representatives.
My disclosure: In the interest of full disclosure, I should divulge that I am among those who would benefit from this mortgage reduction plan, so I do have an agenda, but at least it isn't a hidden one. - 15437
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