Possible help for real estate market
In mulling over the current real estate dellima, I have come up with one area of the mortgage problem not being addressed nor solutions offered.
It is believed that the lack of momentum in the real estate market is caused by the oversupply mostly due to current foreclosures. Though this is true, it is only partially true. A good portion of the homeowners (responsible mortgage paying) homeowners who actually “had” equity in their homes at one time, now find in order to sell their home, they would have to pay the bank the shortfall in order to sell as well as lose their deposit. Many are now forced to stay in their homes, or allow foreclosure in order to move. This situation is making the real estate spiral worse, as NO ONE can move, except of course people of means or who have owned their home for a very long time.
People who have been responsible in paying their mortgage should be given an avenue to be able to move. They should be able to transport their mortgage without need of additional down payment or perhaps even given half credit from the mortgagor of their original down payment.
So assume you’re once $250,000 home is now worth $165,000 and of that $250,000 you put 10% down or $25,000, and you now have a mortgage of $225,000. If you want to sell, you will have to pay the bank $60,000 and lose your $25,000 down payment. Since you don’t have $60,000 to pay the bank and another $25,000 to put down on a new house, you must either stay put, or walk and let them foreclose. Not good for anybody.
However, if you could swap your home for one of equal value (you sell yours first to establish the value) and take your mortgage with you to your new home, you would be able to move, not lose your whole down payment, and save your credit. Granted you would still owe more than the house is worth, but you would be ahead of the game in that you were able to move without defaulting. You would wind up with a $225,000 (or less if the mortgagor gives you half credit for your down payment) mortgage on a home that is currently only worth $165,000, but that’s what you have now, and that’s what the bank has now. But at least you have been given a way to move. If the bank allows you to walk from your current mortgage, they have less, and so do you.
Granted this is not the answer for those people, who are in over their heads and not paying their mortgage, but what about the other 80% of responsible mortgage paying homeowners who are “stuck” because they owe more than the property is worth and they can’t move unless they default. Wouldn’t that help these individuals at least be “able” to move.
A big question in my mind concerning this RE problem is, how many who are walking now are doing so because they are truly in over their heads and can’t pay as opposed to those who do not want to pay cause it’s not worth what they are paying for now. I can’t help think the later is more prevalent than anyone is talking about.
There is no fairness in this situation. For all of us who are still paying our mortgage regardless what the value of our house is worth now –we are still in the majority, and any bailing out of any measure is not fair to us. However, as with the banks and the economy, we are forced to look at the big picture, and do whatever is necessary to come out of this and get home sales moving again. There are many plans that I have mulled over in my mind that would mitigate loses both to the homeowner and the banks to help the situation. The fear however, if put into action, how many more would bale ship to get out of their overpriced homes, thereby making the situation even worse. It is a catch 22.
But what is clear to me is that for us citizens willing to take the responsibility of continuing to pay our mortgage, that plans should be enacted to allow us to move forward, and that in itself would be a big help to getting the market and home sales moving again.
Would be interested in hearing your opinion on what you think the actual numbers of people are in this upside down situation who are either not moving or worse walking because of it.
And last, would they be willing to take such a deal?