Ya ya I do not have a doctorate in Economics but I have not heard a single plan on how to fix this mess so I will give it a try. We need to address the following;
Fannie Mae & Freddie Mac
This one is really simple; allow the central bank to give both Fannie & Freddie a 2% loan with interest only payments for five years and term of 40 years. This will bring in new capital and allow the two agency’s time to deal with the current mess and time to repay the loans. Also stockholders that forego their due dividends should be allowed a 50% tax deduction.
If the Fed’s take over Fannie and Freddie this will cause a big problem as people will think that this is an entitlement. This would not allow the private sector of reenter the market and this will cause a list of other issues. A Fed take over can not be allow. A Fed loan program is the only real way to address this in regards to Fannie and Freddie.
Lenders, Banks, Hedge Funds and the list goes on & on. They need to ride out the credit crunch without a bailout. The business need to start writing loans again. Banks are in the business of lending money so let them lend. The businesses need do get moving so letting them work for their money just like you and I.
The banks do not want to realize their real losses. These are real losses and if the banks want to cut their losses then they need to lighten up on the mortgage guidelines a bit. If people can not qualify for a loan with the guidelines as they are then there will be less qualified buyers. Simple supply and demand will bring down real estate values. This lack of equity is what is hurting the banks so I can not help but ask what are they doing?
- Vacant homes
The homes that are currently sitting empty are our most serious problem. These homes need to have tax relief for the people that purchase these homes. This plan worked in the 80’s and it can and will work again. If these homes remain empty they will get vandalized and homeless or drug people will move in. his will continue to erode the near by real estate values.
- Short Sells
This method of selling foreclosed properties is working buy the banks that own these properties should not be allowed to refinance the in coming buyer. The single biggest problem in these transactions is the selling bank wants to write the new loans. This practic needs to stop.
The impending foreclosures are the only area where we can do some real work. Most people do not like to here this because they do not understand how it impacts the economy but the Prime Rate needs to be raised to strengthen the dollar. This will stabilize our economy and settle down the commodities market. This is big as gas prices will come down which will affect everything from air fares to food. Its biggest effect is that real estate values will stabilize and this will give people on the edge some options.
There is currently a tremendous amount of homes sitting empty because people could no longer afford to make the mortgage payments once the loans reset. With extremely limited refinance options, even if the home owners have equity, these people are financial trapped in their homes. At this point it really becomes a business decision to let the home go back to the bank. And this is how the meltdown begins to feed upon itself.
If anyone has a better idea then lets get it on the table.