Do you think that the Private Sector can help the Housing Problem?
If you believe that the Housing Problem is at the root of the financial global crises why not let the Private sector get involved. I propose that when a mortgage restructuring takes place and a lender determines what the homeowner can afford, and reduces the owners equity stake in the home to 10% or something like that instead of kicking them out onto the street (depending on what the homeowner can afford to pay). So lets use as an example a homeowners who's monthly payment is currently $2500 of which 95+% is interest, and they can only afford to pay maybe $1000 per month as they got into the house with a sub-prime loan and cannot afford it, they never could and were hoping that the value of the house would go up to cover themselves. Well, strip them on 90% of the equity allow them to stay there and resell the other 90% to the open market for the balance of the payment, in this case $1500 per month.
Then all that is left to do is for the government to allow for two tax breaks for the new investor to make it worth their while to buy the 90% stake in a home that they are not going to be living in and a guarantee for the old subpime borrow who should have never been allowed to purchase the home in the first place.
#1 The Government must give the new buyer a Tax Credit for the interest paid, not a tax deduction.
#2 No Capital Gains Tax, Zero Capital Gains tax for the investor when they sell their stake in the house.
My thesis is that private capital can fix the problem if you make it a tax haven for them, yes that is a Government subsidy for the middle to upper class, but it would fix a lot of the problems that the middle and lower class are having, so it really is a win, win... I think!
Finally the US government has to guarantee the payment of the Home Dweller, turning the Toxic Asset back into AAA paper once again. This in my opinion would put a floor on the housing market, stimulate private investment in housing and open the credit markets back up.
Because I'm not an economist, I'd like to hear the opinions of economists or market savvy individuals regarding this plan.
Why would it work or why not?
Best Answer - Chosen by Voters
I think the issue would be greed.
For the investor, why pay to buy 90% of something at $1500 a month for who knows how many years when he/she can simply let the price drop, foreclosure and pick the property up for a pittance without tenant I have no say over?
Also, you do know that you are actually suggesting that the government is shouldering a huge part of the costs. The US government is already running huge deficits, allowing tax credits on the scale you are suggesting will put a huge burden.
Chances are it might be better for the government to take that 90% equity rather than the private sector in your plan, just like they are doing with some financial instutions, but in this case there would be much less maggots under the carpets that require more funds.
The "housing problem" is merely a side affect of central bankers trying to consolidate power. I'm not joking, top economists predicted it many many years ago. http://www.themoneymasters.com/MM_bailou…
I am afraid the global economy is a much bigger and more disturbing problem.
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"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
- Henry Ford
"Their secret is that they have annexed from governments, monarchies, and republics the power to create the world's money...".
- Prof. Carroll Quigley
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
- Thomas Jefferson
I don't completely understand your logic. But here's a thought. Why can't we take the loans that people received under sub-prime mortgage lenders that have been found to have predatory motives, and allow them to have 50% of their payments go to the principle payments? This could continue until the banks are able to show black on all the outstanding home loans that they authorized under extreme pretenses and a hopeful bottomless market. People would own their homes in no time flat! Of course the banks would lose out on all their insane interest so we couldn't do that...
The answer for why this will never happen: Our country still doesn't give a crap about it's citizens as much as they do investors. Hence the backing of a huge bank bailout, but the lack of backing for the auto industry bailout. 300,000,000 jobs could be lost if the big 3 go under, just in the first year. How many jobs were we going to lose if the banks weren't bailed out? I still haven't figured out if the 300 million number includes the people who sell the vehicles also, or the ripple effect that would happen from all the people who provided services to those 300 million. Bring on the recession, better yet the depression. Who cares if the USA falls. Maybe there would be less immigrants that way... (sarcasm should be evident)
