Blog, Blah, Blah....

Tired of the yada, yada, yada on this subject?
Yeah, I was too, now I am totally jazzed!!

I didn't think there was anything new, and I certainly wasn't excited over the possible fixes laid out by the government to handle the Sub-prime mess---Yes, but that was before I talked to John Vogel, Professor at Tuck School of Business at Dartmouth.  He appeared on my show this past Thursday.

Why aren't guys like this front and center in the news with their ideas being implemented.  There so much to share about this, but in short--here goes.

His idea is called the Last Change Mortgage (right click to download full article) and it is a "Share the Pain" solution.  Nobody gets off scott free, neither the lenders nor the homeowners.

John asserts that believe it or not, when all this first happened, all parties were likely acting rationally--this started before the housing bubble, and on the lenders' side, they kept seeing massive appreciation, so getting more folks into homes was a no-brainer, and the downside wasn't much if the housing prices kept going up.  On the homeowner side, for the most part, families were trying to get into homes sooner than later, otherwise they feared that they would not be able to afford the same house next year, since they were already chasing real estate appreciation.  And then....

THE PERFECT STORM HIT-And we now see the outcome.... 

So, here are the highlights....

• A pool of money for the Last Chance Mortgage is created
• The homeowners in trouble borrow this money at 3%
• The lenders take less than what is owed on these mortgages, a kind of global short sale on these mortgages-making these home values realistic and affordable again.  The LENDERS PENALTY FOR MAKING A BAD DECISION
• Lenders are happy with this because they do not want the real estate back, especially in the state of disrepair in which it usually returns.  Their loan loss ratios recover, and they are getting healthy again, too.
• The number of foreclosures is dramatically reduced, along with all the ripple effect of unemployment, crime, retail indicators (being able to afford to fix-up), and many others.
• The homeowner gets to stay in the home (assuming they can afford this low, low rate), and they get all the benefits of homeownership, such as interest deduction, etc--they JUST DON'T GET APPRECIATION.  The HOMEOWNERS PENALTY FOR MAKING A BAD DECISION. When and if their situation improves, they can sell and move on to a home where they can enjoy all of the benefits including appreciation.
• With new layer of affordable housing created by this, more homeowners can come into neighborhoods, revitalize these homes, and begin have what was intended by the American Dream! 

There is much more to it, but this is an overview.  This is the best idea yet!
If you have any comments, please post them, I'd love to hear them, and pass on to the author of this brainstorm!