The present credit crisis has many facets to it. One of those facets is the mortgage market. The sub-prime mortgages and the variable rate mortgages have caused a great deal of dislocation for many involved as either borrower or lender. The conventional 30-year mortgage is an old standard, but there is nothing magical about the term of 30 years. Just as some people take a 15-year mortgage, there could just as easily be a 40-year mortgage.
A mortgage, like a bond, has two pieces of its arithmetic that can be adjusted. The interest rate can be adjusted upward or downward, and the length of the life of the mortgage can be adjusted in years. A simple way to keep people in their homes where practical is for the interest rate and length, the maturity of the mortgage to be extended. These two adjustments can keep millions of people in their homes. When the credit crisis is over, or when real estate prices come back up, there will be a natural paying off mortgages and the selling of real-estate. Then, these special situation mortgages will eventually disappear from the system. Such a program will calm the fears of many families and bring some rational behavior to the real estate and mortgage markets.
It is time for the Fed to step in and encourage banks to take an active lead in bringing about the recovery. The big guys have seen their industry avert a disaster for everyone, now is the time for them to be firmly encouraged to do the same for the rest of the population that is hurting. Stay tuned.
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3 comments:
Hi MT!
Adjusting the years of a mortgage is such a great idea, and now that you said it, such an obvious way out of this! Simplicity is a beautiful thing. Right under the nose!
Your nudes were lovely. I thought the industrial windows beind the second one would even be lovely as a stand-alone. Great rendering of the breasts on the top one.
Jackie Robinson- wow. What a great memory to have.
You know- I didn't read anything about the White House regulatory plan, I just assumed it would be an empty spin token. No surprise at all. The emperor is not only naked, but he has no balls!
I enjoy your sentimental pieces as much as your expert items.
-Kristine
An innovative idea. There must be a downside to this brilliant plan, but maybe not.
One possible problem with it is the fact that the average American moves real often these days. I think maybe every 5 years. A 40 year mortgage might mean lots of refinancing as people keep moving around. There's a lot of refinancing going on anyway, I gather from just listening to ads on the radio.
I have an idea for the mortgage crisis also.
I hear that there are neighborhoods full of empty houses which folks have been evicted from while rents in other parts of those metropolitan areas are rising due to increased demand for rentals from former homeowners.
In cities where both these situations are happening, how about allowing denser zoning in the afflicted residential areas? Then the homeowners can downsize and stay in their own house by taking in renters to help pay the mortgage. Also this can provide more affordable housing for renters.
I think a lot of people are in a house that's too big for their needs. Zoning can be changed at the local level. The national politicians can use bully pulpit to advocate this sort of solution, but it would be up to local areas to implement this.
I am sure folks would find many downsides to my idea. Single family residential neighbors often resist up zones. One problem is parking the cars for more density in the neighborhood.
My solution to that problem is transit and the bicycle.
Thanks for your comment to my blog.
Buying more time for real estate market to recover could help, but out here on west coast, it seems like market should go down quite a ways as million dollar starter homes (San Francisco) seem really out of line compared to jobs in that area. Either houses must go down or jobs start paying more.
Housing market may make more sense in parts of Ohio. Out here on west coast, market inflated not due to jobs and new home buyers. Mostly just due to values inflating for previous owners who sold and bought another home.
Regulating mortgage industry would help as mortgage companies created illusion that more money was available for homeowners than would be realistic. That situation is one thing which inflated home prices.
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