According to the Washington Post, bankruptcy filings by Americans were almost 1.1 million in 2008, a 32 percent increase from the prior year. Bloomberg News reports that pending sales of existing homes fell 4 percent in November. What a surprise that bailouts to billionaires and big business have not in any way improved the U.S. economy. Pouring money into the top hoping it will trickle down and ignoring the middle class is not going to get consumers back into the malls and buying cars.
There is a house in my neighborhood that has been empty for more than a year due to foreclosure. It is a nice house that the bank is trying to sell for about $100,000. A good deal since the true value of the house is probably in the $200,000 range, but because there are a lot of foreclosures and bargains out there no one seems to be snatching it up. The house was last sold during the big housing boom for almost $300,000, which was a very inflated price. The family that bought it fell victim to the subprime mortgage crisis. ...
On the flip side there is a family living in the apartments in our neighborhood that lost a townhouse they bought in pretty much the same way. In the year they were trying desperately to hold on to their townhouse, they fell behind on all their other obligations and ended up basically living on credit. They both have jobs and have always worked. They are now paying rent while trying to dig out of a large financial abyss.
What if the couple I mentioned was given a chance to buy the home in our neighborhood with a decent conventional 30-year fixed-rate mortgage at 5 percent, like grandma and grandpa had. Let them borrow up to 80 percent of the home's true value. The house is actually worth $200,000, so they could borrow up to $160,000, which would put them into the house with some equity. The bank would get its $100,000 for the house and the couple could use the extra money to restructure and pay off their debt. The county would have a property taxpayer in the home. You could call it the "Fresh Start Mortgage Program."
In exchange you could require the couple to sign/agree to live in the home and commit to the neighborhood for three or five years and the penalty for selling the home early would be that any proceeds from the sale would go back into the "Fresh Start Mortgage" program to help other people. You could have a reputable nonprofit administer the program and make one requirement be that people attend a weekend workshop on budgeting and financial management.
This kind of program would actually get people shopping and eating out again. If we are serious about fixing our economy we have to lend a hand to all the people who were ruined by the housing crisis, credit crisis and medical and health debt. With new legislation on the books for credit card reform and Obama promising health care reform, now is the perfect time to offer struggling Americans a fresh start.
Sallie VanHouten lives in Blaine.
