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Friday, October 10, 2008

Banks Hold Economy Hostage, Blackmail World Governments

Joel Robinson for

For the past six years the Mortgage, Banking and Insurance industry have knowingly sown the seeds of the current economic crisis, as the government stood by and did nothing.

Now that the time has come to reap what they have sown they do not want to be stuck holding the bag of $1 Trillion dollars in bad debt, at first they started playing musical chairs with the debt. Later, when certain insurers went belly up and banks got caught with the bad paper they went to the government and essentially said, "We're not going to pay for all of this… you help us out or well bring the entire system down with us."

Now that the governments are on board with helping out, the banks have begun to add any all bad debt they can muster up to get off of their books. The governments would be well advised to just focus on the bad mortgage debt.

Liberty Newsprint is of the opinion that all parties involved should pay up to not just the Banks.

For example if Joe Borrower owns a house he needs to sell but can't because he's under $100K for what he can sell the house for we think that the shortage should be spilt up between the government, the bank and the borrower.

We think the split shout be 40% for the government 40% for the bank and 20% for the borrower.
In this case it would be $40K for the government and bank with $20K for the borrower.

We think that the government should set up a program for people who have bought a home within the past six years and are in a shortage position. The government would secure up to $100K loan to secure the shortage debt by the borrower plus 20% toward the purchase of a new primary residence they could qualify for and afford. In this case $20K plus up to $80K for a down payment on a new primary residence. No second mortgages would be allowed on these homes. When the house is sold and there is additional equity in the value of the house the government would be able to recoup up to 50% of it loss that’s $20K in this case or any value above the down payment a homeowner needs to purchase another primary residence.

Also government should set up a rating system for banks so that investors know when a bank is getting itself into trouble.

This would go a long way to shoring up current home values and restoring confidence in the system.

Wednesday, October 8, 2008

A Solution to stop the bleeding in the Housing Industry

Joel Robinson for

For those who bought home in the past 5 years or have an adjustable loan that will reset sometime in the next 5 years.

In order to stop the precipitous decline in the housing industry government needs to provide subsidized 'Short' loans for the difference between what a homeowner can sell there house for and the amount the homeowner actually owes. This loan will provide rates the homeowner could receive on a regular home equity loan for up to $100,000

This will allow homeowners to reevaluate their financial positions to more fiscally sound situations if necessary. As it stands now homeowners with good credit have no other choice than to wait until home values increase before they can have the freedom to seek other housing accommodations.

How would this work:

Homeowner A house's current value is $200,000 he owes $250,000.

His payments are about to reset from 4.8% to 7.0%

That is a payment of $1467 to $1664 and he can't afford it.

Homeowner A sells the house for $200K

Now He Has Options:

Option A:

He gets a loan from the government for $70K at 7% that’s $465 a month.

He finds a smaller place for sale at $150,000 puts 20% down from the government loan.

He gets a mortgage for $130,000 at 6.5% and pays $839 a month.

Now Homeowner A is paying $1,304 a month on a mortgage the will not reset. That is a saving of $163 a month in the mortgage payments.

Option B:

Continue to pay off the government loan of $50K and find a place to rent.

That is $333 a month plus rent he can afford to rent an apartment for $1,134

The Benefits of Government Subsidized Short loan?
This will allow homeowners to pay back the shortfall without damaging their credit. Also, by stabilizing hundreds of thousands of homeowners the economy will benefit. As it stands now homeowners have few viable options that only will exasperate the decline in the overall economy.
Stop the decline of housing prices Extend more help to a greater amount of homeowners. Keeps the homeowner from transferring debt to government and lenders.