One of the stressful prospects facing many American families is losing their homes through foreclosure. The Federal government is searching for ways to prevent this from happening. The situation is difficult to solve with conventional thinking.
- The homes cannot be sold for the price the owners paid.
- In some cases, the homes cannot be sold for the balance of the mortgages.
- Many of the mortgages have adjustable rates, which have risen significantly to the point that the payments are beyond the families’ ability to pay.
- Foreclosures depress the market values of neighborhoods.
- Vacant homes invite unwanted elements into the neighborhood.
- Foreclosure gives the mortgage holders the costs of the process and the burden of managing or selling the homes in a depressed market.
The homeowners want to remain in their homes, but they have limited incomes to pay for housing. Even if the homeowners remain in their homes, they may never recover the amount of the mortgage when they sell. Foreclosure would create financial and legal costs for everyone and destroy the credit rating of the homeowners.
The mortgage holders do not want the costs of foreclosure and they have limited abilities to manage or sell the homes. The neighbors want their neighborhood to keep its value and safety.
What can we do?
How would it be if the homeowners could remain in their homes at a cost within their budget? What if the mortgage owners could still receive a return on their investments? What if the costs and stigma of foreclosure and its aftermath could be reduced? What if the costs to the taxpayer could be reduced or eliminated?
Consider this: A new agreement between the homeowner and the mortgage holder: a “Mortgage Conversion Contract.” The homeowner gives up ownership of the home in exchange for relief from the mortgage and an affordable lease of 3-5 years with an option to buy the home after that.
- The homeowner remains in the home, without the problems of bankruptcy and with the possibility of becoming a homeowner again.
- The mortgage holder becomes a landlord with rental income and time for the market value to recover, once the current crisis passes.
- The Federal government could subsidize creation and implementation of a model “Mortgage Conversion Contract” to speed the process and assure fairness.
- If the homeowners qualify, they could receive rent subsidies under existing government housing programs.
This concept could ease the stress and costs on millions of American homeowners and the holders of their mortgages. How does that sound to you?