A Bailout for Homeowners
November 13, 2008
By Mukesh Chatter
Amidst all the talk of bailouts in the wake of the current economic crisis, I had a thought: why not bail out homeowners to jumpstart the economy?
Think about it: There are currently 45 million homeowners in the United States. What if every homeowner received a break on their mortgage payment (up to $15,000) on their primary residence for one year, paid for by the federal government. This may sound silly, but it's not.
Look at the advantages:
1. This will free up roughly $600 Billion for consumers to spend on goods, services, automobiles, etc. Jumpstarting the economy at the consumer level.
2. No foreclosures.
3. Banks, not having to worry about toxic assets, will not need a bailout.
4. Banks will also get paid, refilling their coffers. Without the worry of foreclosed homes, they can also increase lending.
5. A huge adrenalin shot will be provided to every sector of the economy.
I know what you're thinking: who pays for this? I have a solution to that as well.
Those who want to receive this benefit will have a year added to their mortgage on the back-end - the last year's payment will go to the government instead of the bank, so the federal government WILL get paid. If the home is sold prior to the mortgage getting paid, that homeowner will be allowed a few years to pay the sum off.
This plan could also be limited to those making $250,000 a year or less. Couple my idea with some standard lending practices and it could be very effective.
The bottom line: many more refinements can be made. However, it's much better to go about fixing the economy this way then using $150 Billion in taxpayer money to bail out AIG (NYSE: AIG) and others (banks, the auto industry, real estate.) It puts money in the pockets of the taxpayers instead of those responsible for bringing so much economic misery. Best of all, the government won't take much of a hit at the same time, and the economy will be given a much-needed boost.
If you like this idea, pass it around.
I welcome your thoughts and comments.
Comments
On
Friday, November 14, 2008
Anonymous
wrote:
Sick of the government bailing out everyone and everything! What happened to free markets?
On
Thursday, November 13, 2008
Andrew
wrote:
a friend of mine suggests folks in trouble should get a one-time refinance from whatever crazy/stupid mortgage you have to something lenient like 40-year 0% (or very low) interest... and if you're still in trouble after that, you shouldn't be a homeowner.
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