We are at a point in time when tens of millions of folks witha good credit rating and adequate equity in their home are about to be foreclosed on and made homeless through no fault of their own. The folks who will foreclose on them will lose reliable customers and devalue their asset base, by crashing the housing market. Could it be that there is possibly a better answer to the problem?
I recently
refinanced my home, taking advantage of a lower interest rate and lowering my
monthly payment by one hundred dollars.
The downside was temporarily lowering my equity in my home, but in
balance I decided that a decrease in monthly payments was the greater
consideration. I asked the mortgage
servicing representative how lowering my interest rate was an advantage to his
company. He explained to me that the
company’s primary income is a fee paid by the government mortgage corporations
for the servicing of the loan and that they don’t want to see my business taken
away by another mortgage servicing company offering the same lower rate that
they are offering me. They also profit from
their new loan origination fees. This
all seemed reasonable to me, so I went with the offer.
So what am I
suggesting here? Design a mortgage
refinance that will keep good customers in their homes and protect the value of
the home and the income stream as well.
How would you do this? Create a
new Coved 19 Mortgage refinance program that would put a moratorium on mortgage
payments for people unemployed by the virus.
Have the government pay the mortgage servicing companies the same fee
for not collecting the payments as they were for collecting them. This is a far lower cost to the government
than foreclosure. Have payments resume
when employment for the borrower resumes. Precompute the new payment with no
penalties, but with the loss to the government of interest income added back
into the principal and the payments resumed for a period equal to the original
term of the loan. If no increase in
payment amount is desired, lengthen the term of the loan accordingly. This all would require some cooperation from
government and mortgage service companies and the borrowers, but it would
benefit them all. It would be a way that
capitalism could serve the nation. There
is a touch of socialism thrown in as well.
The two systems work well in concert with each other and they always
have. All that is required is skill and
reason being applied.
Cheers, Old
Buz 2/2/2021
Iambloggerbuz.blogspot.com
