Print ArticleNow that the government has decided to bail out all those financial institutions, it seems only fair that it should also offer a bailout to all of their customers who are behind on their mortgage payments. Any institution benefiting from the government bailout should be required to negotiate with its customers who are currently in danger of having their homes foreclosed.
First of all, the government should mandate that that these institutions convert all variable rate mortgages to a fixed market rate. That alone would allow many homeowners to stay in their homes. The institution would just have to eat the cost of this conversion, which would be based the current market price of the property – which is likely to have decreased. Any portion of the old principal balance which exceeds this price would be added to the end of the new mortgage in months to pay.
For example, let´s say someone still owed $220,000 on a property whose market price is now $200,000. Since what they owe is 10% more than the market price, 10% more mortgage payments would be added to the end of the mortgage. Therefore, their mortgage would take 33 years to pay off, not 30 years. If the borrower wanted to pay off the mortgage early or sell the property before the mortgage was paid off, the extra three years of payments would be due in the form of a lump sum at that time.
Of course, some homeowners would still have trouble making their payments even after this kind of rate conversion. Lenders who benefit from government bailout should be forced to offer these people mortgages on houses that they can afford. In this case, the lender would get the borrower´s current home and the borrower would be offered a mortgage on a less expensive home that would be within their means. This means test would be done the old-fashioned way.
Now, any these borrowers who had back-due payments on their original homes would still be obligated to pay up. The amount that they were behind would be rolled up and added to the cost of their new home as additional payments beyond the normal 30 years, as I outlined above for those whose mortgages on their current home exceed its current market price.
I believe this would be a fair way for the government to deal with homeowners who are delinquent on their payments to corporate beneficiaries of the bailout. It would give them an opportunity to keep their homes, while not actually letting them off the hook for anything or giving them a handout – which would be unfair to everyone else.
First of all, the government should mandate that that these institutions convert all variable rate mortgages to a fixed market rate. That alone would allow many homeowners to stay in their homes. The institution would just have to eat the cost of this conversion, which would be based the current market price of the property – which is likely to have decreased. Any portion of the old principal balance which exceeds this price would be added to the end of the new mortgage in months to pay.
For example, let´s say someone still owed $220,000 on a property whose market price is now $200,000. Since what they owe is 10% more than the market price, 10% more mortgage payments would be added to the end of the mortgage. Therefore, their mortgage would take 33 years to pay off, not 30 years. If the borrower wanted to pay off the mortgage early or sell the property before the mortgage was paid off, the extra three years of payments would be due in the form of a lump sum at that time.
Of course, some homeowners would still have trouble making their payments even after this kind of rate conversion. Lenders who benefit from government bailout should be forced to offer these people mortgages on houses that they can afford. In this case, the lender would get the borrower´s current home and the borrower would be offered a mortgage on a less expensive home that would be within their means. This means test would be done the old-fashioned way.
Now, any these borrowers who had back-due payments on their original homes would still be obligated to pay up. The amount that they were behind would be rolled up and added to the cost of their new home as additional payments beyond the normal 30 years, as I outlined above for those whose mortgages on their current home exceed its current market price.
I believe this would be a fair way for the government to deal with homeowners who are delinquent on their payments to corporate beneficiaries of the bailout. It would give them an opportunity to keep their homes, while not actually letting them off the hook for anything or giving them a handout – which would be unfair to everyone else.
view author's RSS feed
