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Solving the Foreclosure Crisis

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There is really a simple solution to solve the foreclosure crisis. I’m sure it has already been considered, and many banks on their own have probably already begun to implement it, however this should be a global plan and required. I propose that all banks, mortgage companies, lenders of any kind will be required to reduce the principal balance of all mortgages to the current value of the home. This should not apply strictly to those in a hardship, all properties should be available to buy and sell at their current market value outright as needed. This is a special circumstance—it is a crisis. This shouldn’t be expected to happen every day just because a property value goes down, but this is a rare instance where America needs help!

After implementing this program, banks can then reduce the number of interest rate and payment modifications, short sales and deed-in-lieu approvals. Homeowners having difficulty will be able to sell their homes to more buyers. Currently, in order to get out from under a home that one cannot afford, he must attempt to do a modification to make the payments easier to afford. If that still doesn’t help, he needs to attempt a short sale. In order to do a short sale, a buyer makes and offer and the seller submits that offer to the bank; they then can wait up to three months to give their decision. Most primary home buyers are not able to wait that long, only investors with large sums of money that can buy with cash would be willing to wait a period of time, to obtain a low price.

Investors should not be enabled to take advantage of this situation right now by going out and paying cash for all these homes from owners in desperate positions. Instead, if all homes are selling at their current val...

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...n and on until that card is maxed out, and they no longer have money to buy food, gas, or even pay some bills! Now, we have a new problem. This person’s credit score has dropped, they can no longer borrow, and will begin paying bills late, and their score will drop further, again, and this cycle will continue until the person decides they need to claim bankruptcy or let their home go to foreclosure, or both. This is happening too much all over the U.S. right now, and really all over the world. Something needs to be done to stop it at least in our country. We need to stabilize this market, and give everyone a chance to get these scores back up. The next step will be to make sure that it is more difficult to obtain financing but when it is obtained by credit worthy people, interest rates are kept to a reasonable limit to avoid this snowball effect in the future.
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