My suggestion to the mortgage bailout

[louis c]

I posted this a few days ago, before President Obama's plan was released. I will do so again, with slight medications.

Anyone who purchased any kind of mortgage prior to September 15, 2008 will qualify. I choose this date because that is the date, in my opinion, that started the economic meltdown.

Anyone with a mortgage will qualify for a new rate. Let's say 5%, fixed, for thirty years. All new adjusted rate mortgages are disqualified. All adjusted rate mortgages where applications are dated before the September 15 date do qualify. New home evaluations are taken for the consumer. This can be done electronically by area or using municipal evaluation numbers. Everyone who is 'upside down' can have their principal reduced by the amount owed, less the evaluation. There will be a cap at $50,000 and the total amount can not be greater than $450,000. The $50,000 in principal is paid directly to the bank by the US government. The government then holds a $50,000 first lien on the property, to be paid after any transaction of any future sale or refinance, even before the bank. For example, a home has a $300,000 mortgage at 6%. The new mortgage in $250,000 at 5% for 30 years with a $50,000 government lien which has a 2% interest rate, per annum, collected at the point of sale or when the mortgage holder refinances, should the economy improve. The incentive for the bank is that they receive $50,000 cash, which is greater than the 1% haircut on the loan and they have a viable customer now paying a mortgage that has a monthly "nut" of about $350 less. In the mean time, those who do not participate because they enjoy a low mortgage rate and equity already, will not see a situation where the upside down customer is getting something for nothing.

By the way, if we nationalize even one bank, we can establish a 5% rate for everybody, with a 15 or 30 year mortgage, thereby setting the industry standard for anyone wishing to participate. Same deal for everyone.

I know, I sound like a Socialist. but hey, I don't mind that label.

The cost will be about one trillion dollars for 20 million home owners. However, we should get every nickle back, with 2% interest over the thirty year period.