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End The Housing Crisis
Finally...A Solution for "Main Street"
Obama's Plan Does NOT
End Foreclosures.
This Program Does:
End Foreclosures.
Empower Individual Homeowners.
Turn "Toxic" Assets Into "Valued" Assets.
The Mortgage Equity-Equalization Program
February 1, 2009: West Islip, NY - A
bold new program to end the mortgage foreclosure crisis was announced
today. The "Mortgage Equity-Equalization Program" will end the
foreclosure crisis by giving individual homeowners "cash vouchers"
that are equal to the lost value of their real estate.
Declining real estate values has been
the primary cause of the financial meltdown. If we could return home
values to what they were three to five years ago, the foreclosure
crisis would end.
"That’s exactly what the
‘Mortgage Equity-Equalization Program’ does", says program
author Stephen Flanagan. "This plan offers financially-strapped
homeowners the help they need to keep their homes. Let’s stop the
bailout madness and take action now to turn ‘troubled assets’ into
‘valued assets.’"
Here’s the Solution:
1) Use a portion of the $350 billion
left from the original TARP package passed in October. No additional
money is required.
2) Give homeowners with sub-prime/adjustable
mortgages a "cash voucher" that is equal to the percentage
decrease in home values over the last three to five year (around
20%). For example: Let's say you bought a $200,000 home four years
ago. Home values nationally have declined 20% making the current
value of your home $160,000. The government would take money from
the $350 billion bailout and present you with a voucher worth
$40,000. This will "equalize" the equity in your home. You
will now have $160,000 in equity on your house and $40,000 in equity
from the government. This puts the homeowner's equity position back
where it was before the housing crisis happened. *
3) Homeowners would then go to their
Mortgage holder with the voucher and use the "cash" value
to reduce the principal balance on their mortgage. The Bank will be
permitted to use this "cash" under the conditions that
they modify the terms of the loan to reflect a $40,000 drop in
principal amount AND modify the terms to reflect the current
mortgage market. At an average of $11 per $1000 in mortgage savings,
that $40,000 credit will reduce the monthly cost of that loan by
$440.00.
4) After modification, banks would
cash in these vouchers with the Federal Government, thus
"infusing" much needed cash into the banking system. Note
that the SAME $40,000 has now been used to improve the bank’s cash
position and improve the Homeowner’s personal financial
circumstances.
5) Homeowners now will hold a
mortgage debt that reflects current home values, thus removing most
instances of mortgages with balances that exceed home value (a prime
cause of default and foreclosure). This program will "stabilize"
the housing market by vastly reducing foreclosures. It also removes
the need for the government to "guarantee" toxic assets because
toxic assets will become viable assets.
6) The homeowner will now have an
extra $400 per month to spend on other things. This translates into
a $4800 per year "stimulus" to the economy by this one
homeowner.
7) Multiply this by millions of
households and you've taken care of "Main Street" AND
"Wall Street". Note that some estimates show that more
than two million homes are in danger of foreclosure. This program
should be able to prevent most of these foreclosures. Combine this
with government-backed FHA or other loan programs, and the housing
crisis will be over.
8) The program will also help
homeowners who want to sell their homes, but the sale price does not
cover the mortgage balance. That homeowner can now sell that house
for the market price of $160,000 and still be able to pay off his
$200,000 mortgage using the $40,000 equity equalization credit.
Though the Feds will try and attach all
kinds of strings to this, it remains a simple and viable solution to
TWO MAJOR problems: foreclosures and a sagging economy.
Imagine the Federal Government killing
two birds with one stone. It would be master stroke.
Whether the homeowner wants to keep the
house or sell the house, this program will reduce the number of
forecloses and will infuse cash into the mortgage banking industry AND
the general economy.
This program empowers INDIVIDUALS BY
LETTING them DECIDE if they want to renegotiate and stay in their
homes or sell their home. Homeowners will be free to make the deal
that's best for them. The program will be SAFE for taxpayers because
only a bank can cash in a voucher and then only if the Bank has made
the terms of the renegotiated loan viable for both homeowner and
financial institution. Of course, homeowners will still have to
"re-qualify" for their loan modification. But the lower
monthly costs on a modified loan will help them qualify easier.
There are many details regarding this
proposal that will need to be worked out, but the basic concept is
surely one that deserves the attention of Washington.
There are other aspects of the proposal
that are designed to insure that such a massive breakdown in the U.S.
financial system never happens again.
The first requirement would be the
repeal of "toxic" portions of the Community Reinvestment Act
(CRA). This piece of legislation is directly responsible for the
mortgage crisis because it requires banking institutions to make bad
loans.
The second requirement would be the
"break-up" of Fannie Mae and Freddie Mac. Like the
"trust busters" did to railroads and phone companies in the
past, we must "break-up" Fannie and Freddie. A half dozen or
so regional versions of these companies would insure that if one goes
bad, it does not bring down the whole economy.
"At a time when trillions of
dollars are flowing from Washington to correct the economy,"
Flanagan states, "I have seen nothing to help millions of
hard-working homeowners. Let's get the Mortgage Equity-Equalization
Program on the Congressional Agenda and let's start helping Americans
hold on to the American dream".
Stephen Flanagan is President of
SPC Marketing Company and Stevens Publishing Company, both
headquartered on Long Island, New York. Flanagan has many years of
experience as a businessman and has been politically active for
decades. He is currently Executive Director for the Conservative
Society for Action.
Footnotes:
* This program is designed to
address the needs of sub-prime, adjustable and Alt-A mortgages. The
current housing crisis is tied directly to the requirement that banks
makes these loans and the fact that these loans are primarily
responsible for rising foreclosures and the strain on the banking
system.
The voucher value would be determined
by the mortgage balance. If you have a $200,000 mortgage, your voucher
credit would total $40,000. If you bought a house for $200,000 and put
20% down, your mortgage balance would be $160,000. This would result
in a $36,000 credit (20% of $160,000). The equity voucher percentage
would be based on actual home value declines (20% was used for
illustrative purposes). Additionally, the voucher value would not
exceed the combined value of the mortgage balance and the original
purchase price of the house.
Contact:
Stephen Flanagan
Conservative
Society for
Action
P.O. Box 221
Brightwaters, NY 11718
631-983-0813
csa-1776@earthlink.net
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