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By: Marco A. Gonzalez
There are ten steps the government must take in order to help solve the foreclosure crisis.
1. Offer families educational information about purchasing a home: The government should create an agency that is designed just to help all the people that are ready to purchase a home. This service needs to be mandatory and free of charge. This program will help all the families that are about to purchase a home understand the buying process including all the details. It is important because many people claim they do not know what they signed and blame the mortgage companies, banks and other lenders of fraud. The information needs to be available in all the languages available, or at least the most common.
2. Set up temporary options for families who lost a source of income: This program needs to be designed to help families with their mortgage payment. If a family had an annual combined income of $60,000.00 and one looses their job, the current income is now $30,000.00; the payment should go from $1,000.00 to $500.00 for a period of time. Now, this program will not affect the value of the house, nor the total amount due, the time the home is financed will simply extend to make up for this help. This help can only be temporary, for example 3 to 6 months until the family member gets back to a full time employment. If the family member cannot find a job that supplements the previous income, the family can then be given the option to move to a more economic home.
3. Offer families optional housing programs on available foreclosure homes: This program will help families get back in their feet without having to damage their credit score. Everybody’s ultimate goal is own a home and it could be devastating to lose it just because you were laid off. There are many foreclosure homes currently available, why not give families the opportunity to still own a home. This is a win-win situation for the government and families, the government continues to receive the property taxes, plus income taxes from all the lenders that will continue to receive a monthly income and the families will continue to own a home.
4. Get rid Of Variable Interest Rates: It is good for the lenders for extremely bad for the families. Many can argue that the families can take advantage of the low interest rates, but the high interest rates will make sure to make up for the loss of the low interest rate plus a lot more. This is a big reason many people are losing their homes, along with the loss of jobs, but a family that was paying $500.00 per month, now has to pay $800.00. This cannot continue! A fix interest rate needs to be set for all home buyers.
5. Set a fixed interest rate for all families: The fixed interest rate can still vary depending on your credit score, but if it is fixed it is locked! The families will know exactly how much they will have to pay unless a modification is done. A modification is done either if the family is re-financing or if the family if in financial trouble. The fixed rate also needs to have a maximum cap.
6. Set a fix payment determined on family income: The payment needs to be determined on family income and credit score. If the family only makes enough to afford a $100,000.00 home, then the payment should be no more than $1,000.00 per month. This means that the net monthly income for the household should be no less than $3,000.00. This will ensure that the family can easily pay a mortgage with 33% of their net income. It is important to mention this formula with the net income and not the gross income. The taxes do not belong to us, therefore cannot and should not be counted in the formula like they are now. If the family’s net income goes down to $2,000.00 per month, then the family can only afford a home payment of $666.66.
7. Spread the first time buyer’s incentive: Many people jump into this and then still lose the home and the government had to pay thousands of money just to motivate the family to purchase a home they no longer own. The best suggestion for this program is to spread the incentive through the life of the loan. Instead of the government giving $7,000.00 or $10,000.00 all at once, why not issue the same incentive spread on even portions every year. If the family keeps the same house, the incentive continues year after year. This will motivate many families to keep their homes just to receive the government incentive and the ones who do not keep the same home, will lose the incentive. This will give the government the opportunity to expand the incentive to those who decide to keep their home for the entire finance term.
8. Penalize with jail people who damage foreclosure homes: It is said that many of the homes that are recovered from foreclosures end up damage by the previous owners. This should be a serious crime as financial damage is being caused to a property that does not belong to them. It is important for families to know that the homes belong to the lender until paid, therefore if damage is found in a home at foreclosure, the family member will have to pay for the damages or face jail time.
9. Use Foreclosure homes primary to First Time buyers, government housing and families in the optional housing program: Foreclosure homes should be used mainly for first time buyers, government housing and families in the optional housing program. If the government is helping the banks by injecting billions of dollars, then the government should have some power to decide on the way the foreclosure homes are used. A foreclosure home is an investment opportunity to the wealthy. The wealthy will buy the home, fix it and then turn around and sell it. While this is being done, the family that lost the home is now living in an apartment for the next seven to ten years waiting to get a good credit score to buy another home. It is safe to say that the majority of the families that lost a home due to foreclosure never even attempt to buy another home in the next ten years. If the families are given the opportunity to stay in their homes, none of this would happen.
10. Finally, assign community involvement time to help fix foreclosure homes: There are many people assigned to do community involvement work daily. These people could help the government and their communities fix the homes and get them back in shape. There are many activities people can do, such as landscaping, painting, roof work, a/c work, cleaning, etc... UIW offers credit to all students who complete their 45 hours of community work.
