The Economy (How We Can Reduce The Foreclosure and The Unemployment Rate Immediately)

We know that the main reason we are in the current economic situation is due to the real estate mess we have created for ourselves and the job losses we have incurred. We also know that there are very smart people who are handling the situation and we appreciate that; but, there are times when simple people, or an average person like me, may see things the big guys don’t see, due to the magnitude of the problem and their search for a big solution; yet it may be the best possible solution they offer. This, I think, is one of those times and the solution I offer, I hope, will solve the problem.

We are in a serious crisis; as serious as a foreign country attacking us. In times like these, the only way to win is for the nation to come together and each citizen to contribute voluntarily for his country’s defense. The proposal I have is on a voluntary basis and not mandatory. It is important to have safeguards and oversight to prevent abuse by any party involved.
The following blue print will help the Economic Recovery become a Reality by cutting the foreclosure rate and the unemployment rate by 50% in a very short period of time.

Foreclosures:

Foreclosures are the main reason the notes are worth almost nothing, and we have a big supply of homes in the market that are bound to be foreclosed or are already in the process. If we solve that problem we can solve many of the problems altogether. Here is my proposal:

As we know, most knowledgeable business people will jump on an opportunity to make the most money when an opportunity presents itself. I would think this is not an exception.

Well-to-do and savvy business owners, individual or corporate, who know they will be around for the next five years and are happy with that particular employee, can assist their employees in the following manner:
Ø Employer contributes 15% of the monthly mortgage payment and property taxes of his employee who is in default on his home mortgage and obtains a 30% share of the property
Ø Employer’s contribution is only a portion of the payment; no down payment and closing costs are to be involved.
Ø Bank absorbs late payments of six months, plus brings property taxes current
Ø Employee lives in property for a minimum of three years, five is better

This will allow the employee to stay in the home, which in turn will keep the property from going into foreclosure, which in turn will help reduce the inventory of properties in the market, which in turn will keep values in the neighborhood from further decline. The cooperating employer will build equity on the property in the next 3-5 years. He will have another tax deduction: the interest on that mortgage, plus the property taxes. Employee should be happy with this arrangement because otherwise he would have nothing left anyways, he would have lost his house.

The lender will not have to foreclose and incur foreclosure costs and diminished value and return on his investment. Those costs can add up to anywhere from 10-20%. So, forgiving the late payments and bringing the taxes current is minuscule compared to the foreclosure expenses and the devaluation of his investment.

If there is a second lien, the holder of the note to accept the deferment of the interest payment for five years and cut the balance of principal owed into one half. Not doing so, the other alternative is the second lien under these circumstances (foreclosure) would have been wiped out anyway. This way in 5 years the holder of the second lien can collect 50% of the principal and the accrued interest, which will pretty much come close to his initial investment, give or take a few hundred or thousand dollars. It is still much more than what he would get if he chose to let the property go foreclosed. This will also help in saving a lot of second lien notes from going bust and further hurting the economy.

If an employer cannot do this, we can open the door for any investor who is willing to get involved. In both cases we can offer tax incentives such as deducting twice the amount of the interest they are paying. This will reduce inventory in the market, mortgages will be paid, people will stay in their homes, and the recovery will be much faster. When the real estate market is doing well, everything else follows. A healthy economy helps real estate prices appreciate. The few dollars monthly investment will produce good returns to employer and employee, financially, morally and emotionally.
(Refer to example 1 below.)
Refinancing: Streamline
Anyone who has been paying on time for the past two years and is still employed should have the right to refinance to the lower rates if their mortgage rate is higher than 5%.The refinance process is to be a streamline refinance, no major paperwork should be involved. The logic being if a person can afford to make the higher payment he definitely can make the lesser payment, so, why put them through hell to refinance the same amount with the same bank; even if the loan has been sold in the secondary market, the bank that originated the loan should have most of the original paperwork to begin with.


Unemployed:

The economic crisis has impacted jobs severely. We have many who are unemployed and more will be added to the unemployment lines if we do not take action. Many will qualify for unemployment insurance benefits, but finding a job in a timely manner with these economic uncertainties will be difficult. Chances are they will run out of those benefits before they find a job. I suggest the following:

Unemployment insurance to pay the unemployed individual 65% of his salary and the employer, who otherwise would lay off this employee, to pay the remaining 35%. In return, employer gets twice the amount (35% of salary) he is paying in salaries as tax deduction, and if the employer keeps the employee after nine months, the employer gets twice the salary as a tax deduction for the following year. This will keep the employee at his job earning a living that in turn will be able to continue a normal life and spend as usual, providing for himself and his family and not become a burden on the economy. The employer will benefit in two ways:

1) Keep his employee so as not to incur additional costs and time of recruiting and training an unknown employee
2) Benefit from tax deductions
(Refer to example 2 below.)

Unemployed with no hope of finding a job soon enough:

Create a trust fund for donations and ask the public to participate to help extend unemployment benefits. Donations to be tax deductible at a rate of twice the amount of the donation. This will provide the unemployed ample time to find a job, which should not take that long since the chances of the economic recovery will be much faster and less painful. Of course, we have to have safeguards for anyone not to abuse this help.

I have faith in the people. If we explain to them that helping the unemployed in this way will help the entire economy, they will understand and help as they would during any disaster here and abroad; and this is as big if not bigger than a disaster.
(Refer to example 3 below.)

Once we have reduced the number of foreclosures and maintained a certain level of employment, we can be certain we can conquer this silent enemy that is dividing our country, increasing poverty, and downgrading our lifestyle. We have to take action now!

Example 1.

A house with a mortgage of $200,000 with a payment of $1,300 per month and a property tax of $200 per month has a total obligation of $1,500 per month. Employer contribution will be $1,500 x 15%= $225 per month to qualify for 30% share in the house.
In case there is a second lien of $50,000 at 10% annual interest rate, the second lien holder to reduce the loan amount to $25,000, and the accrued interest will total $50,000×10%x5 = $25,000. At the end of the 5-year period the second lien holder will be entitled to $50,000. At the end of the 5 year period, and since the economy will not suffer as much as it would otherwise, chances are the property will appreciate in value to qualify for a refinance or sale at a decent price.

Example 2.

If an employer has to lay off an employee (making $2,000/month salary) due to financial stress (which he has to prove is the case), instead of laying off the employee, the unemployment insurance should or could pay 65% or $1,300 per month on behalf of the employer, and the employer to pay the remainder 35% or $700 per month to keep the employee. The employer then has the right to deduct twice the $700 equaling $1,400 a month from the employer’s income taxes.

Example 3.

A commission to be assigned to manage funds deposited in the trust fund for the unemployed to collect, monitor and disburse the donations to the unemployed. If a person or an entity donates $5 to this fund, that person to be entitled a deduction of $10 from the income taxes owed to the government. The purpose is to give a powerful incentive to donate generously.

Good Luck!
megastore123.com[/]

Was this helpful? 0 0 Comments

You're reading The Economy (How We Can Reduce The Foreclosure and The Unemployment Rate Immediately).