Here is the solution to most of the ills of the current housing crisis - in the form of a languishing US House Bill that would allow homeowners facing foreclosure the option to stay in their homes as renters, and perhaps even compel their lenders to be more cooperative with the distressed borrowers when negotiating loan workouts.
That's right - a solution to the foreclosure problem that would save banks from certain ruin, keep homeowners in their homes instead of out on the streets and onto Public Assistance, put a bottom on the housing price crash while allowing for high-cost areas to come into par with median income levels, and save the taxpayer trillions of dollars in debt that is to be piled on to the trillions of dollars in debt we already own.
Sound too good to be true? That is understandable considering the constant barrage and misinformation being shoveled by the Federal Government's sycophants like Paulson and Bernanke, the ridiculous political posturing of Barney Frank and his faux-hearings orchestrated to merely put the "official story" into the congressional record, and the complete and utter surrender of the Fourth Estate to news cycles and sound-bites.
The newest old proposal you have never heard of: Saving Family Homes Act.
Millions of people face the loss of their homes over the next few years. While the politicians in Congress have developed a wide variety of complex schemes in order to hold back this flood of foreclosures, including one passed into law last summer that provided up to $300 billion guarantees for new mortgages on homes facing foreclosure, none have had much impact thus far.The unavoidable problem with these schemes is that it is difficult to design a plan that aids families facing foreclosure without giving an incentive to other homeowners to also default on their mortgage.In addition, it is hard to justify taxing the people who are struggling to keep up with their own mortgages in order to help those who default. It is even harder to justify taxing ordinary people to help out the bank executives, who issued hundreds of billions of dollars of bad loans.
As a result, to date these programs have not prevented a tidal wave of foreclosures and evictions. The number of foreclosure filings (there are typically two or more filing for every actual foreclosure) is now approaching 300,000 per month.
I am sure there are some drawbacks somewhere in this plan, and it can be expected that there will be responses to this article and the legislation that will make some reasonable arguments as to why this bill should continue to languish in committee - as it has since MAY 2008.
But, I defy anyone to come up with a plan that is more practical, more easily implemented, would help more borrowers and lenders, and that would save the American Taxpayer trillions of dollars and a protracted economic downturn, perhaps even an economic depression.
With passage of this bill, the banks would be forced to either become the nation's landlords - which is a business they do not want to be in under any circumstance - or working with homeowners to refinance or modify mortgages into affordable 30 Year Fixed products at current market rates.
This bill, or something similar to it could also provide opportunities to the renting ex-homeowners to later assume a mortgage and repurchase the home from the bank when the economy or as their personal financial situations allow.
While the basic point of the right to rent is simple, it can be extended in various ways to further aid homeowners. Bernard Wasow, at the Century Foundation, has proposed some additional measures to facilitate the transition to rental status or possibly a return to ownership. Daniel Alpert, of Westwood Capital, has a somewhat different version that creates a mechanism for homeowners to buy back their homes after five years.
The alternative is a tsunami of foreclosures that further drives housing prices down for all of us as the banks potentially become the owners of 1/3 of all US homes, a drawn-out cycle of bank failures and continued taxpayer bailouts of a 'select' few banks, and ultimately the destruction of the dollar as a world currency with permanent state of stagflation.
That would be the end of the middle class.