The Facts: Many real estate loans that were granted to those who bought houses in the United States since 2002 are being wiped off the books, as many of these homes are being foreclosed upon, or the mortgage company is allowing the home owner to enter into a short sale, which also wipes the loan off the books. Every time a house is sold in a distressed circumstance, we are not only punishing the owner of the house, but we are also punishing the economy of the United States.

The Problem:
Homes are being sold after foreclosure or short sale far below actual market value. These homes are flooding the market, which has been driving down market value of surrounding properties for the past five years.

The Solution:
“Sell” the house to the current owner at current market value instead of placing the property into foreclosure, or selling the home as a “short sale”.
Erase the original mortgage and start a new mortgage at the current market value ONLY IF the current owner agrees not to sell the property within five years. The new loan would be contingent on current owner agreeing to pay the original mortgage in full to the company if the owner sells the house prior to the five year period ending.

Current owners must meet the following criteria to be eligible:
Must be their primary residence
Must have purchased the property after 2002
Must not have refinanced for a higher amount of their original mortgage
Must have had a hardship such as loss of income, illness, spouse deceased, etc.
Must be able to qualify under current mortgage company guidelines

Mortgage companies would be receiving the same amount in monthly payments from the current owner as they would from a new buyer – what’s the difference who makes the payments? The property is going to be sold for a reduced price anyway, so why not “sell” it to the current owner if they can afford the new payments based on current value. Furthermore, the original loan granted to the home owner is going to be taken off the mortgage company’s books anyway, so why not let the original home owner keep their house thorough this type of “home loan modification”?

Everybody Wins:
Mortgage companies would save money by not having to pay for the foreclosure process, not having to pay property taxes during the foreclosure process, not having to pay the staff that is needed to manage the huge amount of distressed properties the mortgage company has, not having to pay real estate commissions when the property is sold after foreclosure, and not having to sell a home that, on many occasions, has been damaged by the former owners. Also, it would not be months before the VACANT property is actually sold, and instead, the mortgage company would be receiving regular monthly payments towards a new loan, instead of nothing on the original loan.

The property would continue to be maintained, instead of deteriorating, which brings down the value of neighborhood homes. Mortgage companies will receive the exact same mortgage payments that they would receive if they sold the home to another person. Owners of real estate would keep their homes for a minimum of five more years.

This would greatly decrease the real estate inventory of short sales and foreclosures, helping to start the return of a normal real estate market. The economy would begin to recover because the strength of our economy is directly related to the real estate market.

Russ Eppen, Realtor
Broker/Salesperson

Greg

It will take about that long for the market to absorb a steady-stream of distressed properties that the banks and government are trying desperately to keep from flooding the market all at once. There’s just no doubt about it – financial institutions, encouraged by policy-makers, are conducting a best-in-a-bad-situation dynamic inventory management strategy (almost similar to the way OPEC and other cartels deal with the marketing of their resources).

It is impossible for home prices to rise until all these distressed properties are finally cleared off the market and normal conditions return at last.

The key number to keep in mind to determine when we’ve finally reached re-equilibrium is the household-income to monthly-payment ratio. Compare the after-tax disposable income of the kind of families who tend to live in a certain neighborhood or “tier” of housing in a local area with the Principle-Interest-Taxes-and-Insurance (PITI) that a potential buyer would face at current market prices. If it’s below 3:1 you’re probably not at the bottom yet.

From what I have seen lately, the CS charts now start with 2000 as the base year. It makes me question if
Shiller hasn’t sold out to the NAR.

Perhaps Dr. Shiller would like to proffer his opinion on the value of his own residence. It’s “zillowable” in case you were wondering.

Furthermore, I will assume that the “impromtu” answer of “3rd” inning is probably more true to what Dr. Shiller TRULY feels as it was the “uncensored” version. But hey…he’s a media darling and who pays the bills for the media? Used House Salespeople and Debt Peddlers perhaps?

This party’s just getting started. I wouldn’t listen to an Economics professor. Heck…the heads of my Econ department were instrumental in bringing Greece into the EU. Look how that turned out.