Foreclosure Crisis Solution

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Foreclosure is a very sensitive topic and one that almost everyone decides to look up to the tax payers to solve. This is not a feasible option, like tax relief or programs of payment assistance as that only adds to the economy spiraling down and not solving issues for the homeowners. When faced with a person who is going through foreclosure the main concern of the lender is getting their money back. The capital invested in the buyer to purchase the house is ALWAYS secured by the house - but the interest is not. The issue that overwhelms a homeowner is a change in their income due to unforeseen circumstances such as death, illness, change in household (ie divorce) and unforeseen employment changes. That though to a bank is not IMPORTANT and this has homeowners avoiding the bank as the cold shoulder is what they receive. The best policy for a situation like this is communication. There are two general homebuyers under stress profiles: The homebuyer that needs time to get back on their feet and the homebuyer that can't afford it now and can't later and would like to downsize but can't because the house wont sell. The best option so that everyone is happy is to allow only interest to be paid with no capital allocation. What I mean is - the interest the homebuyer is paying in their monthly payment should be the only payment they should be making with no contribution to equity. Though, the interest should be calculated as if equity payment has been made if interest only payments are made for more than 6 mos. The house will not go down in value thus equity is secured for the bank and the homeowner is still living in the house allowing them time to "get back on their feet". This option is kind of like a freeze option. ... ... middle of paper ... ...paying off the loan, then a mandatory life insurance issued by the bank to cover the home loan should be incorporated into the loan payments to ensure that if in later life the homebuyer was to pass on, that the bank would be the beneficiary to the insurance payout and that the residual insurance payout be then turned over to the homebuyers beneficiaries upon settlement of the remaining amount as if - request for pay off has been made that day with no future interest calculated as deemed by law, just like car insurance is on a financed car. Also, in the possible outcome of the homebuyer requesting a refinancing option through the same bank or another - the program's unpaid equity should be treated as a balloon payment in which should be taken into account with accumulated interest until the day of refinance request in addition to the remaining mortgage amount.

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