Lots of folks have suggestions for what the president should do about the problems in the housing market. On August 12, Doom reprinted an article by Bill Maloni who encouraged President Bush to "Get on the bus." He suggested to the President:
Wouldn’t a combination of the Fed ”priming” and Fannie and Freddie providing billions in liquidity look pretty good right now?
Today on Broker Outpost, a mortgage broker [bnovoryta] posted an Open Letter to the President. He also had a solution for the President:
Allow existing borrowers who cannot: make payments solely due to rate adjustments; or refinance due to a decline in local property values (LTV >100%), to refinance into one loan with a 30 year fixed rate at 8%. No cash out allowed to prevent abuses by borrowers, and fixed fees to prevent abuses by financial providers. No prepayment penalties allowed for new or old mortgage payoffs (existing investors benefit from this safe harbor v. foreclosure).
Mortgage insurance at a fixed rate (ex: $100/mth per $100,000) is required for the portion of the loan over 80% LTV (loan to value), as are tax escrows.
Any credit score is eligible. Borrowers must “prove their income” (W2’s, or bank statements for self employed) and ability to make their new payment.
Allow the existing infrastructure (lenders, brokers, title & mortgage insurers, and investors) to participate and administer this program. They must adhere to the low fees and conditions established by the US government. The government would audit compliance, and most importantly: Re-insure the mortgage insurance providers, if and when losses exceed insurance premiums.
By far my favorite letter to the president though, was written by another broker, [Mortgage321321] further down the "Open Letter" thread:
Dear Mr. President:
It is obvious that many people who purchased homes in the past five years had no business purchasing those homes. Foolishness comes in all ages, looks, creeds, etc.
As a mortgage broker who never did a stated income loan, I lost a lot of business to my competitors (at least the ones that are still around.) I never believed that anyone should get a loan at some teaser rate, have it adjust, and hoping that the client will come running back to me so that I can refinance them again.
Well, in the long run, I guess I was right and a lot of the other mortgage brokers who put their clients in jeopardy were wrong.
Now, it looks like some of these brokers want the American Taxpayer to bail out their clients (who are probably calling them up, cursing at them, crying to them, or what ever) as well as make the broker’s bank account become full again.
It is amazing how they it was okay when the people who need a bail out probably cashed out a few times, went on vacations, buy their fancy cars, and realize that was just borrowed money.
Let the system work. I sold my house in 2005 and I am waiting for prices to get back to sanity. That was the risk I took and if does not happen, then I am out of luck.
However, please do not use my tax money to not make it happen.
Oh, and on a side note, using terrorism as a scare tactic just shows how bad business is.
Thanks for your time.
Mr. President sir, just in case you are counting, I’m with Mortgage 321321, please let the system work.