Any economists out there?
Cure economic death spiral
Foreclosures are at the root of falling property values that underpin the financial future of every American and the economy as a whole. Banks must race to sell homes from under their owners as long as their collateral's value keeps plummeting. As more foreclosures speed the decline, banks desperately need intervention to end their death spiral. Here's a solution I support:
Require that banks hold foreclosed homes for two years. Banks will then work to keep owners in their homes. Homes not able to be rescued will become two-year rentals, exempt from capital ratios. These can be lease-optioned to worthy prior owners or turned over to property managers.
The downward cycle is broken and home values stabilize. Banks resume lending for construction as well as other industries. Stimulus programs now have a defined framework to work within. A powerful turnaround begins across the entire economy
Better than any stimulus plan, it attacks the source, not the symptoms, of our growing economic crisis. Moreover, it is "shovel-ready," has no pork, and won't pass a big bill on to future generations. Sadly, I can't get
's ear. (Any economists listening?) Washington
There are probably a lot of devils in the details, but it certainly is an idea that nobody else has floated. What the federal government is doing now is like spackling over seismic cracks.
The idea of letting the “owners” rent their former homes is appealing. One thing that has been galling during this issue is about all those poor folks losing their homes and/or investments when they put down less than what it takes to get into a house as a renter. Consider that a three-bedroom house in decent shape will rent for $1,500 a month. First and last month’s rent plus a security deposit, pet deposit, cleaning fee, etc., can run at least $5,000. So anyone who got a house with a no-money down loan, or a very small down payment, isn’t losing anything if they have to give it up.