Friday, August 8, 2008

Perfect storm – Rough Times now and coming…

When we observe the conditions that are forming our current political and financial situation, many people refer to the movie, “The Perfect Storm”. In this movie, a fishing boat captain, who needed to get his catch to market, ran through a juncture of several storms in the north Atlantic, which combined to make a “Perfect Storm” with larger waves, currents, and winds than any normal storm could generate.
Today, we have several storms that are converging upon us;

1. The Iraq War
2. The Energy Crisis
3. The declining value of the Dollar
4. The mortgage crisis
5. The Job crisis
6. Corporate profiteering

Any one of these is bad; 2 or 3 are rough, but all 6? And a recession looming? Now you see why I am concerned.
The next President and his cabinet have a lot of work to do. Our country is at risk here; our Lifestyle – under attack! And our future is something WE need to get under control. There is almost no one that I meet today who is NOT affected by these issues. Especially people who want to heat their houses this coming winter.
The bad news is that it may get worse before it gets better. Mortgages are still adjusting (until 2010). The war in Iraq and Afghanistan will take years to resolve, with a horrific cost of American lives.
Our Dollar continues to buy less.
The mortgage crisis has shaken the banking industry, and Wall Street.
Unemployment claims are at an all-time high, not counting people who have lost benefits.
And we still see the incredible CEO incomes and buyouts continuing, while real wages decline and jobs get outsourced.
This needs to change. Obama and McCain, Are you listening?
My voice is just one; we need to articulate this to all our elected officials. The time for “lip service” and condescension is over; we need action and real solutions, not proposed by Lobbyists, but by our elected officials and educational institutions. So pass this on, add your comments, and make our pain be heard by our government. The time for action is now.

Friday, August 1, 2008

The Chenkin Mortgage Crisis Solution

As of this writing, over 10 million Americans own homes which are mortgaged for more than their appraised value; They are at risk of losing their homes and (with impaired credit, etc.) may be "out on the street" or worse (Living in tents).

The banks, who foreclose and sell on these properties, frequently take 50% of the value of the mortgage as a "Short Sale" price. This is because the property either is vacant, likely in disrepair, or the former owners need to be evicted, or worse. These houses are a blight on our neighborhoods, attracting vandals, vagrants, and crime. The speculators who buy forclosed houses frequently rent them out or hold them, sometimes vacant, until the market improves, not adding a lot of value to the community.

These discounted homes reduce the comparable values of the other homes in the neighborhood, and force homeowners who are not in foreclosure to accept less for their homes, or wait until the market "recovers". With Sub-prime loans adjusting through 2010, There will be plenty more "at-risk" homes added to the market for the next two and a half years.

Government Bail-outs, like the Bear Stearns event, DO NOT HELP THE HOMEOWNERS IN TROUBLE. They are a financial means to keep the banks afloat, usually with Federal guarrantees.

Here is my solution, and reasoning:

1. Have the banks "write-down", or discount the at-risk mortgages to 50% of their face value - before a Short-Sale or foreclosure. The banks created the artificial runup in home values, with relaxed rules, predatory lending, loosely regulated mortgage brokers, and restrictive mortgage terms. At 50% of the mortgage value, Most homeowners can keep their property, Make mortgage, Tax, and Insurance payments, and maintain the integrity of the family and neighborhood. Remember, a short sale may only give the bank 50% of the mortgage anyway, and take many months, paperwork, and angst.

2. Have specific rules in place to prevent homeowners and the banks using the plan for unjust enrichment or speculation; This is not intended to be a solution for over-leveraged investors with many properties in foreclosure.

3. Put more programs in place for Jobs, Economic development, and community development. People with reduced mortgages can be required to do specific community service, depending on their situation.

4. Require life insurance (not mortgage insurance or PMI) for the borrowers, to pay off the debt and free the property for the children/heirs of the borrowers.

This is a proposal to get the mortgages Performing again, keep people in their homes, and preserve community values. If you agree, Please pass this on to your elected officials and friends, and urge them to help your neighbors stay your neighbors, to preserve your property values.