The main problems in the U.S economy are the housing market and the demonization of the banks which supposedly caused it.
There were many who were complicit in the crisis. Politicans who pressured banks to make "risky" loans. Loan brokers like Countrywide's Angelo Mozilo who wrote questionable loans knowing he could stick Fannie Mae and Freddie Mac with them after collecting the fees.
Like the great songwriter John Lennon said, “There are no problems, only solutions”
Today will be the first part in my three-part article on how to fix the housing market and why it is necessary.
First, there are about 28% of all homeowners who have negative equity in their homes. Out of that number there are a significant amount who are current on their mortgages. Those are the people I am targeting.
As a country it is crucial that these people stay in their homes and stay current to their debt obligation.
The first part of my solution is to have Fannie Mae and Freddie Mac invite non-delinquent homeowners with underwater mortgages to apply for refinancing if their loans are backed by the government-sponsored entities.
Fannie and Freddie should be required to waive risk-based financing fees and permit loan-to-value ratios over 125 percent, which is the current limit for making refinancing available.
While current interest rates for 30-year home mortgages continue to approach 4 percent now, some 8 million of the 27.5 million mortgages held by Fannie and Freddie have interest rates over 6 percent.
My solution would allow millions of current mortgage holders to lower their annual mortgage payment significantly.
On a $250,000 mortgage a refinance from 6.5% to 4.3% would save the homeowner almost $350 monthly.
That extra money would give the homeowner more incentive to stay and improve their cash flow by over $4,000 annually.
Some people are opposed to this, but the U.S helps many countries and people who cannot help themselves. Why not help some wel- intentioned person who stays current on their mortgage? The American homeowner is the backbone of our country.
Stay tuned in the coming weeks — you will see more dramatic and far-reaching solutions.
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