Resets or a 99 year lease?

There is little doubt that the state of the economy has fallen on hard times and that those in charge are having a tough time figuring out what to do about it.  They fiddle here, they fiddle there and Real Estate values continue to be flat and foreclosures continue to spike.  A few people with some expendable cash are jumping on the pain of the people who got involved in two very typical loan vehicles and picking up there property in foreclosure sales – which may or may not be profitable in the near future.

The Sub-Prime Loan concept has been beaten like a dog.  Lenders (Banks) let anyone with a heartbeat buy homes or property without any real vetting of their income or ability to pay.  Within that purview…they additionally built in mortgage rate increases…called “Resets”.  So, you get a million dollar house for no money down.  Usually within a year…you might get a 1 percent Reset rate increase, then another, then another, then another!  Pretty soon, people are talking real money for their monthly mortgage payment. 

Of course, Lenders (Banks) were quick to use this same process for people who perhaps actually had a job, but may not be able to handle the raises to their mortgage payments (Speculators)!  The people that bought these properties with their Black or Platinum Credit Cards……would simply buy and then sell that same property within three months and pocket the difference based upon the on-going spikes in Real Estate prices.  Those days appear to be quite gone – by the way!

This then left the responsible type of buyers who got 30 year, Fixed Rate Loans and Qualified because they did have their ducks and finances in a row and could afford the suitable monthly mortgage payment.  Sometimes however, points were added to the original loan on the front end, back end or during the life of the loan.  This may also cause a “Reset”.  The facts are that when you buy something, you had better be reading or understanding the fine print in great detail.

So, how do we fix the present state of affairs?  Freeze the Reset provisions in all contracts!  What, you say?  How is that possible?  Pretty easy: the US Treasury Secretary issues a edit:  “All Mortgage Payment Resets will be put on a five year hold!”  Five years!  Yes Alice…there is a Santa Claus and yes we can save home ownership in the United States!  But who gets hurt?  Well, the Lenders (Banks) would be given the option:  Freeze all “Resets” or better yet “Renegotiate the original loan documents!”

Who gets hurt in this process?  The Lenders (Banks) that failed to do their due diligence and the people who want a quick turn-a-round on their property sale (Speculators)!  We is helped, people that want to keep their homes!  We are sure that there will be enough people that still lose their homes just due to the state of the economy and the fact that they cannot even make their original mortgage payments…..but many, many will be saved.  Especially the ones that want to keep their homes and are not worried about a rising value to make big bucks (The Greedy Ones!)

Let us hope that the day of the “Resets” will soon be over and our economy can make a solid comeback in two years!  If they continue the “Resets” this situation could become either unsustainable or worse!