RealtyTrac: 2.33 million foreclosures in 2008

Mike,
It would appear that the prevention of future forclosures should be of the utmost importance and the rhetoric from Washington, seems to support that opinion but they are incapable of formulating a solution that allows for it to happen.
At the risk of being over simplistic I believe there are much more effective ways to inject capital into the financial institutions, remove the threat of future foreclosures, recover losses in 401k’s & IRA’s and provide a means to stimulate the economy.
Hoping not to embarrass myself I’d like to submit the following for your opinion as to the feasibilty of such a program. Soooo… here it is!

If taxpayers are forced to foot the bill for the incompetent handling of national financial issues, let them correct the problem directly.

With Congress, having spent over a half trillion dollars to satisfy the insatiable appetite of banks and willing to dump another several trillion dollars to the abyss they created, it becomes obvious that this is not only dismal management but actually borders on out and out theft.

The money being poured into the financial institutions will never be loaned out until they are confident that the other institutions are solvent. With institutions denying insolvency and their counterparts being unwilling to believe they are solvent, there’ll be no lending.

Banks need cash because they leveraged their accounts beyond good stewardship. They do not have the funds to pay back loans and/or return money, on demand, to their investors. They ran a scam on the premise that homes would continue to appreciate.

According to the United States Census Bureau, in the third quarter of 2008, there were 130.4 million housing units. 75.9% of these units were owner occupied. Dealing with owner occupied homes only, it is possible to revive confidence in our economy, fund the financial institutions and recover lost savings since October 10, 2008; and, all this with half the money Congress is willing to currently spend.

With there being 99,104,000 owner occupied homes (76% of 130,400,000), a one hundred billion dollar investment could have relieved if not removed the mortgage crisis created by the lending institutions. Here’s one suggestion:

Each owner occupied borrower would receive a maximum of one million dollars which “must” be applied to their existing loan balance. If the home owner’s balance is over one million dollars, the remainder would be modified to a maximum of 4.2%. Lenders receive an influx of cash (one million dollars) and still even with the reduced interest rate would not loose money but still stand to make a profit although smaller then anticipated. The home owner would have much more flexibility and motivation to continue making payments and remain in their home.

For those whose loan balance is less than one million dollars, the following would be mandatory.

a. The total loan balance(s) “must” be paid in full
b. One half of the remainder of the one million dollars “must” be deposited into a 5 year CD, backed by the government, (in the taxpayer’s name), leaving;
c. The second half to be placed or invested as the individual chooses.

The premise of item (c) is that an individual will not put this kind of money under their mattress. An example follows:

Owner occupied loan of $300,000.00

1,000,000
- 300,000 Loan balance
________
700,000
- 350,000 To be deposited in 5 year CD or (?), in taxpayer’s name
________
350,000 To be used at home owner’s discretion assuming it too will be deposited in a financial institution.

With an account balance of $350,000.00 and no mortgage payment it seems logical that the economy would be revived by the massive spending that would occur. What to do with those who would once again be less than frugal with their future financial needs could be decided at a later date and by other people.

This plan seems far more reasonable and appropriate to truly help the taxpayer than throwing away trillions of dollars to institutions that have proven their individual profits are more important than the financial security of our country. The current plan(s) all seem to be willing to tax my great grandchildren to compensate for legalized theft. Put the money in the hands of the taxpayer and let it recycle back to the banks as they deem appropriate.

PS. My son spent more time in juvenile hall for shop lifting an electric razor than Madoff, when he made off with 50 billion dollars.

Ken Casper
Palmdale, CA, 93550

Dear Mike Larson , I was very impressed by your article on there is no free lunch. Your advice on preparing for challenges (bike riding) is excellent. Mike , just when is someone going to talk about letting the vultures in to clean up the mess. In nature it is the vulture that has the taste for carrion. I hope to hear a reply. Thank you, Anthony !

Ken’s idea seems to be sound and can set the economy on fire. However, what does it do for all of those who do not have a mortgage nor own a home? It appears to be one of those situations where someone was in the right place at the right time.

You say, “We can’t stop Washington Bureaucrats from doing stupid things but we can do something to protect our money.”

The error, here, is thinking that they are simply being stupid. They are being criminals and most of them know exactly what they are doing. We can do something. The wrong thing to do, always, is nothing. These individuals need to be held accountable. I, frankly, am tired of this very reasonable attitude toward these scoundrels.

Call Congress, write letters, get on action commitees, stand up for what is right, tell others and stop making excuses for these people. Enough is enough.