Fixed U.S. Mortgage Crisis – A Simple Plan

Our nation is facing the worst crisis in the property sector in recent history, and has an impact on the performance of our economy. Today there are many debates about the financial security of 700 million U.S. dollars, the team and what measures must be taken to stop the bleeding and restore stability to our financial markets and real estate.

The plans on the table, the supply of liquidity of banks, the purchase of bad loans, and sets all the attacks. These strategies are, as I call it"Silver bullet" or quick solutions that are unlikely to really solve the problem at its root. Purchase of non-performing loans of banks, the government can have a potentially inexhaustible source of non-performing loans and real estate. A moratorium on seizures only see the problem. The growing belief that avoiding the risks of mortgage loans in the amount of loans to real estate sector can grow and continue to a further decline in domestic prices.

In this article we suggesta simple but powerful in this crisis is an opportunity to reverse the downward spiral and create lasting stability in our housing market.

The path

Decades, the mortgage is only for buyers in the United States was 15 or 30 years fixed rate mortgage. If your subscription was successful, the borrower is known, what would the monthly payment of the loan for the next 30 years. The simple formula that was used todetermining the size of a loan to a borrower could afford based on a particular debt-to-income ratio. If this formula was applied correctly can the borrower do not buy a property, which beyond its financial resources. In relation to loans, the risk was isolated disturbances of personal income, such as sickness, unemployment, death, etc.

The current problem is the result of lending practices specifically designed to capture as many persons of high end homes and tap the capitaltheir existing homes for a way to live a lifestyle beyond their means. Nobody can be against the continuation of the American dream of ownership. But this dream is a nightmare because these creative mortgages, driven by greed, who has been abused by the system.

The recipe for disaster has left lenders, mortgage brokers, real estate agents and developers all benefit from buyers who want to combine a lifestyle more motivated, they can afford it or not. Although theseThe reasons are not necessarily destructive of their own, when combined with sub-prime mortgages, which is based on an excess of general confidence in a bull market in real estate and contrary to fundamental principles combined provided in the technology sector, we have a recipe for disaster.

Option ARMS, 80/10/10 arms, two years HELOCs teaser rates, negative amortization loans and other products, it is the people who could qualify for mortgages of up to four times higher than for loansbefore. The safety net is the case that the property would increase in value that the borrower will refinance the loan before the adjustment of interest rates began to return to prohibitive prices allows complete. Mortgage brokers have become more complicated the issue by the refinancing of existing loans with two teaser variable rate next year (end of the issue for two years) and allow borrowers to get money for life in general. As property values continue to increase,the music never stops, not the mortgage crisis.

Now, with borrowers in houses they can not afford to foreclosures flood the market stopped lending, the housing market is in decline for the management of inventory and prices are concerned. Eligible buyers are reluctant to buy credit, because it is close and no one knows whether the market is bottoming out. Potential buyers are holding back and waiting for a sign of a change in the market, which covers only the cycle of decline.

BeforeWe see a recovery in the market value of the house leads into the ground and begin to stabilize and grow. Meanwhile, stocks should be slower and consume; delinquent borrowers must be registered and, if possible, to avoid the resentment of the use of taxpayers 'money' to rescue irresponsible lenders and borrowers, the borrowers who want to change their mortgages will be rewarded. Band Aid approach to the problem is aggravated. We need a solution.

"The Simple Plan"

I call my plan, "The SimpleFloor. "It creates a uniform rate of 4.5% fixed 30 years mortgage by the United States government for every citizen of the United States more than 18 years with a loan of 90% above its underwriting and strict guidelines ensure that the revenue and expenses.

All must be purchased and approved for the new loan. The deadline for the benefits of this program would be 6 months for existing owners and 12 months for new buyers.

I. other delinquent borrowers

Under"The plan of simple creditors who provide an exception for the loan of 90% for value types and, if the defendant all his rights to the new price, you learn to put your past due amount on the back of the new loan and stay in their homes. If you do not pay the debt, the creditor would receive incentives for a short sale (perhaps to accept the existing borrowers). If the borrower is unwilling or unable to reach agreement with management , the block isappropriate.

Example 1:
Amount of loan: $ 150,000
House Price: $ 120,000
At a rate of 13% of the shares monthly payment is euro 1659
At a rate of 11% of the shares monthly payment is euro 1428
With a repayment rate of 9% per month is $ 1207
With an interest rate of 7% the monthly payment is euro 998
At an interest rate of 4.5% the monthly payment of $ 760

Example 2:
Amount of loan: $ 200,000
House Price: $ 150,000
13%to pay the monthly fee is euro 2212th
At a rate of 11% of the shares monthly payment is euro 1905
With a repayment rate of 9% per month is $ 1609
With an interest rate of 7% the monthly payment is euro 1331
At an interest rate of 4.5% of the monthly payment of $ 1013th

The above examples illustrate the payments under the different rates. In both examples, the loan amount exceeds the value of the house, as oftentoday. Borrowers typically try to modify a loan placed back payments and royalties on the back of the loan and the loan of a new beginning.

For borrowers, not the conditions for the total debt, but can not make payments to low note, the Administration should be invited to unpaid balance (UPB) in a range that the borrower can afford to change. If the repair does not alter the UPB to block the body responsible for internal management and sales wouldHouse to a much lower price. This scenario would allow many people to stay in their homes and the inevitable course of the loans that the speed will not be saved.

II current, existing borrowers

Under "The Simple Plan" to help homeowners lenders do not offer criminals the chance to remove the weapons and mortgage rates higher. The owners had set up the chance to refinance existing loans at 4.5%. The loan of 90% and the commitment to valuewould be eliminated. The owners were the outstanding loans and the loan (100%) of debt at 4.5% in 30 years to change a fixed rate mortgage or the borrower can make a new loan with another bank loan, fixed at 4.5 %, and 30 years of age receiving be paid 75% of 1 and 50% of the second. Additional security for a loan, and guarantees, it is easier for banks and investors to manage fixed-rate loans. Borrowers should also be able to add a new lender, see for exampleTerms.

III. New borrowers

Buy In "The Simple Plan" for the first time borrowers and investors who have rental properties and second homes would have an incentive to leave the border and buying a house today. When this happens, the inventory should decline and recovery began.

New borrowers taken with an initial payment of 10%, assessed the current level of debt and precise and appropriate indicators of income.

At first glance, "Simple Plan"significantly reduce the monthly income of banks. However, if the housing figures continue to fall and the loan can not find most of the loans and interest rates are higher in default, and the cycle of decline in more depth in future be expected. The plan will allow banks to do more volume and generate substantial revenue, while the restoration of stability in the housing market.

On the ground, among others, banks get a higher interest rate for the time being, but the soilis much worse and the recovery will take years.

"Simple Plan" is relatively easy to use and incentives for the housing and mortgage market, a new impulse to the community and a lasting stability that will benefit everyone.

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