From one of my favorite sites: halfbakery.com
http://www.halfbakery.com/idea/Solving_20the_20sub_20prime_20mess#1221696405
Solving the sub prime mess
A home tradeup program to solve credit crunch
(+6, -2) [vote for,
against]
Hi there! Been a reader for some time, but this is my first post.
This occurred to me yesterday while hearing about the AIG bailout. The fundamental issue of the current financial crisis in the US is that the banks have no cash to lend, as it is all currently tied up in defaulted mortgages. With no money to lend, no one is able to buy houses, so the value of the repossessed property drops. Additionally, there are too many houses on the market, as builders overbuilt during the bubble. More supply than demand, so when the bank repossess a house that was mortgaged for 500K, it can't sell it for that to recoup the cash. Plus, no one is lending, so no one is buying even at discounted rates.
The only way out, it would appear, is for someone with cash to buy the houses, giving the banks the liquidity they need to start lending again and kick start the whole process once more. Enter the government.
Instead of giving massive amounts of taxpayer money to companies whose greed started all of this to begin with, they can do something that will actually have direct and tangible benefit to the people. They start by buying the foreclosed houses at reasonable market value. This gives the banks the money they need to start lending again. Now the government has spent the people's money on houses. So, how do the people get value from this? The government instigates a trade-up program. You trade your current house, wholly owned or with mortgage in good standing, and get a bigger/better (previously foreclosed) house. You keep paying the same mortgage, you just have a better (and more valuable when the market recovers) house.
So everyone trades up, and the government (over time) has a collection of smaller, low end house. Some of them they can sell at market value (remember, the banks have cash to lend again PLUS there is a larger market at the low end of the scale). But they still have too many units (remember, the builders overbuilt). These final units they use to give a helping hand to the homeless. Give a free home to those most in need, instead of bailing out a corporation whose greed started all this to begin with.
Remember, the government is paying anyway (bailouts). At least this way, everyone gets something. The banks can continue to operate because they have the cash they need. Homeowners get a bigger home for the same money. Entry level buyers get a good deal. And deserving families get a helping hand.
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wuj3888, Sep 17 2008
http://www.halfbakery.com/idea/Solving_20the_20sub_20prime_20mess#1221696405
Solving the sub prime mess
A home tradeup program to solve credit crunch
(+6, -2) [vote for,
against]
Hi there! Been a reader for some time, but this is my first post.
This occurred to me yesterday while hearing about the AIG bailout. The fundamental issue of the current financial crisis in the US is that the banks have no cash to lend, as it is all currently tied up in defaulted mortgages. With no money to lend, no one is able to buy houses, so the value of the repossessed property drops. Additionally, there are too many houses on the market, as builders overbuilt during the bubble. More supply than demand, so when the bank repossess a house that was mortgaged for 500K, it can't sell it for that to recoup the cash. Plus, no one is lending, so no one is buying even at discounted rates.
The only way out, it would appear, is for someone with cash to buy the houses, giving the banks the liquidity they need to start lending again and kick start the whole process once more. Enter the government.
Instead of giving massive amounts of taxpayer money to companies whose greed started all of this to begin with, they can do something that will actually have direct and tangible benefit to the people. They start by buying the foreclosed houses at reasonable market value. This gives the banks the money they need to start lending again. Now the government has spent the people's money on houses. So, how do the people get value from this? The government instigates a trade-up program. You trade your current house, wholly owned or with mortgage in good standing, and get a bigger/better (previously foreclosed) house. You keep paying the same mortgage, you just have a better (and more valuable when the market recovers) house.
So everyone trades up, and the government (over time) has a collection of smaller, low end house. Some of them they can sell at market value (remember, the banks have cash to lend again PLUS there is a larger market at the low end of the scale). But they still have too many units (remember, the builders overbuilt). These final units they use to give a helping hand to the homeless. Give a free home to those most in need, instead of bailing out a corporation whose greed started all this to begin with.
Remember, the government is paying anyway (bailouts). At least this way, everyone gets something. The banks can continue to operate because they have the cash they need. Homeowners get a bigger home for the same money. Entry level buyers get a good deal. And deserving families get a helping hand.
--------------------------------------------------------------------------------
wuj3888, Sep 17 2008
