Don't we all know that the bailout plan failed at first because the public is disgusted and would rather take a short-term financial downturn themselves than reward the powerful 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 government 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:
What we should do is take the $700 billion and pay down the mortgages of all the homes purchased between a certain time period, (let's say 2000 when the real estate prices started going wild and 2006, when they really started going down). That's it. That's how simple it is.
Well, I realize it isn't that simple, and I anticipate some of the issues below to factor in, but first, let's see how this solves the problem.
I did a little research at the National Association of Home Builders (NAHB) website and found that there were about 26 million homes sold between 2004 and 2007. So let's estimate there were about 35 million sold between 2000 and 2006 (pretty rough, but in the ballpark, I'm sure). Dividing into the $700 billion, that's an average of about $20,000 per home. With an average home value of $200,000, that means about 10% of the home value. Follow?
So if you bought a home for $200K, the Bailout Commission writes a check for $20K that gets applied straight to your mortgage. You paid $500K, your mortgage holder gets a check for $50K, etc. So the first thing 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 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.
Wait, before everybody starts ripping the idea to shreds, I'll write some of the potential objections that come to mind:
1. Oh no! It's Socialism! - Yes, I guess it is. And there will definitely be some people who will object to it on that level. But somehow I believe those objections will come from those who don't benefit from the rescue plan. I have a feeling the 40 million or so families who get those mortgage reductions will be able to live with it.
2. It's not fair! What about all the people who bought homes before 2000? - Give me a break! You've enjoyed six years of super-low interest rates and hyper-appreciation. And now you want this mortgage reduction too? In the name of fairness? Please. And as for those who bought after 2006 when the market was already falling, well, I'm sorry, but that was just too dumb. You don't deserve a break.
3. It's too complicated. How do we decide who gets how much? - We may need to come up with some formulas, but I actually think it will be pretty simple. It's just a flat percentage of the purchase price of the home across the board.
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. - 15224
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:
What we should do is take the $700 billion and pay down the mortgages of all the homes purchased between a certain time period, (let's say 2000 when the real estate prices started going wild and 2006, when they really started going down). That's it. That's how simple it is.
Well, I realize it isn't that simple, and I anticipate some of the issues below to factor in, but first, let's see how this solves the problem.
I did a little research at the National Association of Home Builders (NAHB) website and found that there were about 26 million homes sold between 2004 and 2007. So let's estimate there were about 35 million sold between 2000 and 2006 (pretty rough, but in the ballpark, I'm sure). Dividing into the $700 billion, that's an average of about $20,000 per home. With an average home value of $200,000, that means about 10% of the home value. Follow?
So if you bought a home for $200K, the Bailout Commission writes a check for $20K that gets applied straight to your mortgage. You paid $500K, your mortgage holder gets a check for $50K, etc. So the first thing 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 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.
Wait, before everybody starts ripping the idea to shreds, I'll write some of the potential objections that come to mind:
1. Oh no! It's Socialism! - Yes, I guess it is. And there will definitely be some people who will object to it on that level. But somehow I believe those objections will come from those who don't benefit from the rescue plan. I have a feeling the 40 million or so families who get those mortgage reductions will be able to live with it.
2. It's not fair! What about all the people who bought homes before 2000? - Give me a break! You've enjoyed six years of super-low interest rates and hyper-appreciation. And now you want this mortgage reduction too? In the name of fairness? Please. And as for those who bought after 2006 when the market was already falling, well, I'm sorry, but that was just too dumb. You don't deserve a break.
3. It's too complicated. How do we decide who gets how much? - We may need to come up with some formulas, but I actually think it will be pretty simple. It's just a flat percentage of the purchase price of the home across the board.
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. - 15224
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