I have friends, families, co-workers and neighbors all facing foreclosure. Typically people got way overextended assuming they'd be house poor for awhile, but they'd have their foot in the door so as the market climbed, they'd eventually be in a good spot. Others kept refinancing as equity rose and actually lived off the proceeds as supplemental income. The wise choice is to always leave yourself some margin, but that's not what I'm preaching today.
So, you have good people that bought more house than they can afford. No one wants to put them on the streets, and most of them really want to live up to their obligations. They are just overextended and don't want to be slaves to a house they are upside-down in---owing more than it's worth.
Here's the fix. Put together a list of ALL distressed properties in a database. Sit down with the distressed owners and figure out what they CAN afford. Match them with a list of homes they can move down into, and roll the terms of the original loan, at the re-figured lower principal, over to them. They don't have to default and are not homeless. They are matched to a more realistic living situation. You'll still have the highest priced homes defaulted with no one to move down into, and the people at the very, very bottom will have to rent or earn more, but for the vast majority it will be a solution.
1 comment:
I guess I wasn't very clear---people would move down into someone else's smaller, defaulted loan. Whatever principal reduction they negotiate would dictate what homes are available to them to choose from. The bank is protected because somebody downgraded to a smaller, at risk loan.
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