Making Home Affordable

Long story short:  I think it targets a small amount of the population and is unfair to people who are current on their mortgages.  Do I have to default on my loan just to get necessary 'assistance' from the government to lower my rate?  What if my loan isn't guaranteed by Fannie or Freddie?

I think a solution should benefit everyone, not just the borrowers who cannot make their mortgage payments, and not just for first-time borrowers. 

The government should assess what the real values of these homes are in order to find out what the true current market values are.  Of course, this should be done by multiple, independent evaluators, in order to get the average value of a certain area. 

Then, once the government decides on a fair level for a home in a certain area, lenders should re-evaluate outstanding home loans in that area and mark the principal owed amounts down to market levels, especially for loans in which the borrower is upside-down on the loan (to a certain percentage, of course).

Both lenders and borrowers win in this situation.  There is less risk for the lender to lend money, and there is less chance of the borrower defaulting on the loan.  Yes, the lender has to write down millions in loans, but in the long run, that is better than having loans defaulted and not being able to collect anything at all.  Lenders will still be getting their money, just not as much as before.

This will encourage consumer spending since the percentage of their income devoted to paying the mortgage is less.

The ultimate winner is the economy which will benefit from consumers having more money to spend on other goods and services.

How about people who already own their home or are close to fully owning their home?  Their home values have already gone down by the amount of foreclosures in their area anyway.  Let's face it, homes have been over-valued, and this is partly why we are in this mess in the first place.  Staying in denial about the true value of their home only prolongs the time that their home stays undervalued. 

Only after the foreclosed / undervalued homes have been bought can home values start to rise again, property taxes can be paid, and public institutions such as schools and fire departments can receive the proper funding that they need.

Of course, there must be tools and safeguards in place to ensure that this is not abused by people who want to take advantage of the government and taxpayers.Technorati Tags: opinion, economy