A lot of real estate experts including Dean Graziosi have wondered whether the huge $700 billion dollar bailout is really the only solution to fixing the mortgage and real estate industry’s mess.
There are a number of other solutions that can also help to solve the mortgage and real estate industry’s problem. For example, offering low-interest loans to borrowers who have very high mortgages is a simple and workable solution. This would allow mortgage holders to repay their loans and cut the number of properties that end up in foreclosure.
A second solution is to give lenders an amount that is equal to 15 percent of the mortgage principal in exchange for certain concessions. This would keep current loans in place and not force mortgage companies/banks to sell their paper in a declining market.
This would allow the government to establish several guidelines:
· Penalties for prepayment would be prohibited.
· There would be no need for a new settlement or the payment of closing costs because the current loan would not be refinanced.
· Participating lenders would be prohibited from buying, selling or owning any residential mortgage originated without full documentation.
· In the event of a foreclosure, the United States’ government would have its money repaid before any other debt.
The actual cost of the program over time would be about zero because borrowers would be required to pay bank loans to the US government with interest.
Lenders would be required to modify loan agreements, give up prepayment fees and reduce interest levels. Participation is a better option for homeowners because it does not require lenders to pay cash up front.
Dean Graziosi and other real estate experts realize that although the bailout has been voted on and signed into law by the President, there are other ways to solve the mortgage financial crisis.
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