The largest threat to the United States economy today is the growing number of foreclosed homes. The rising number of foreclosed homes has destroyed home values, securities backed by subprime mortgages and entire neighborhoods. Banks also have been suffering because these securities are dropping in value faster than the government can bail them out with programs like TARP (Troubled Asset Relief Program). What needs to be done is to install a short-term and long-term plans to reducing the number of foreclosures per year, therein increasing home values and salvaging the banking system whose backbone is home loans and mortgages. What I suggest is a two prong approach: a short-term plan that involves utilizing right-to-rent laws hand in
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It will also reduce the amount of defaults and foreclosures in general. The desired result is more people in more housing at affordable costs and payment plans that allow otherwise delinquent homeowners to be responsible citizens. This effect is known as housing security: the ability for people to live in the home they want, keep the job that allows them to rent or own the home, and, in some cases, allow children to go to the parent’s desired school.
This would affect lenders as well, motivating them to modify the mortgages, so that the lender can continue foreclosing the house, gain ownership of the house, and even resell the property. However under this rule the current residents can remain in the house as tenants paying market rent for the grace period (around 8 to 10 years) that the rule allows. The sanctity of former mortgage and foreclosure contracts, though, must be waived by the courts in order for this plan to work as they did during the Great Depression and that foreclosure crisis.
The first part of the long term plan is to offer 4.5% mortgage rates not only to new home buyers, as the plan offered by the Treasury suggested in early December, but to all homeowners, through the process of refinancing. The banks and other lenders would be able to then turn around and sell them to Freddie Mac and Fanny