Don,
I'm not disagreeing with much that you're saying about what happened, and I'm not looking to protect the foolish institutions that got us here. What I am suggesting is a way to clear out the glut of foreclosed homes that would eliminate much of the glut and get us back on the right track.
I suppose it all begins with who will end up owning a home that's been foreclosed on, and where the financial institution that owned the loan has gone bankrupt. As I see it, even in bankruptcy others will eventually purchase the assets and the house will be in someone's portfolio at a price that's well below what the original financial institution had financed the home for.
The party that now owns the home, but who's receiving nothing monthly for it would be well compensated by renting the home at rates which people could afford. Clearly the people should be qualified to take a lease, and while the idea may be to eventually permit them to buy the house, it would be at fair market value a number of years later. I agree a 20% down is wise, but if part of the rent is credited toward the purchase, perhaps after 5 years of renting 10% of the down payment is credited from the rent, thus the tenant must come up with an additional 10% and be qualified to finance the remainder.
I don't know that any major govt. assistance is required to put such a program in place, but it seems that govt. is needed to make it happen. I frankly doubt if we'd be where we are if the foreclosing financial institutions attempted to work out something like a lease/purchase agreement with those foreclosed upon, and that failing tried to find another tenant.
If we get rid of the glut of homes on the market, then construction may become as great as it was before all the foreclosures. Once all the dust settles I suspect the remaining companies that hold all the foreclosed real estate will have substantial equity in the properties because they acquired them for a fraction of what the initial financial organization had and when they're eventually sold, they will bring far more then what they acquired them for. In the mean time, rental income alleviates the need to put them right back on the sales market where they'll add to the glut and probably won't sell even at discount prices, just too many homes in that range.
As I say, I agree with the idea that even first time buyers need to have 20% down, I just think a program that allows them to earn it while renting the home of their dreams is a smart way to do it.
Gary |
