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What would you do about the housing “crisis”?

October 26, 2011  |  by John Heithaus

Imagine you’ve been placed into one of the most powerful positions in the US Government at either the Executive or Congressional branch. What courses of action would you suggest (two or three initiatives) to cure the residential housing crisis the US is facing?

Would you focus on foreclosures and “under water” sellers, reforming Fannie/Freddie, “fixing” appraisals, a third buyer stimulus package, changing the MID, spurring private sector job creation, or some other grand ideas? We would love to hear your thoughts on this all-too-important matter.

Let your inner Chief Executive loose to tell us what you think!

Posted in Blog, Featured, MRIS CMO Insights

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19 Responses to “What would you do about the housing “crisis”?”

  1. Bob Costanza says:

    What should have been done earlier. Feds directly pay-downn restructure, and hold troubled loans. Cut out time and money wasting financial institutions. Result would benefit all. Great decrease in foreclosures. Homeowners become solvent with equity. Banks get garbage off their books. Oh, make sure strong reforms are in place to prevent a recurrence.

    • MRIS_CMO says:

      Bob, that's interesting. And it would probably cost a good deal less in the long run. Thanks for sharing. John

  2. Sandy says:

    Instead of "allowing" homeowners who are $100,000 under water to refinance to a lower interest rate that might reduce their monthly payment by a couple of hundred dollars (but they'd still be under water for a decade!)…have the banks reduce their principal to, say, 110% of market value. The banks would be accepting less than that if they approved a short sale or foreclosure, so save the time and liability of a vacant house and let these people stay in their home!

  3. MRIS_CMO says:

    Sandy, thanks for your comment as well. Without sounding like Bill Clinton, I'd have to say "it depends on what your definition of underwater is"! Every market has different water levels and the Feds need to think this through from a local street level perspective to really solve it. John

  4. mohamad berjaoui says:

    loans should be adjusted to fair market values and writen down based on borrowers current qualifications.
    1 on 1 with some exceptions to self employed families and indiviuals.

  5. Maryann Adams says:

    Short-term loans for the repair of foreclosed homes. This should help stabilize housing values and provide jobs.
    Put contractors back to work by lending them the money to repair foreclosed properties for the mortgage holder. This may stop lenders from selling properties for significantly lower than market value. In the past the mortgage holders would sometimes make these repairs to get more money out of the property. Today's volume may be preventing this practice. I am also curious — how much of this "no repairs" behavior is because mortgage insurance is picking up part of the tab. The agreement should be between the holder of the mortgage, maybe the mortgage insurer and the contractor. They agree to the needed repairs, and costs of those repairs, to sell the home quickly for top dollar. The mortgage holder's Realtor should be able to determine an after- repair competitive- range of value. If you agree sign White House petition: http://wh.gov/TQD

    • MRIS_CMO says:

      Maryann, I like the way you think. I know from 30 years in this business how important a part the repair issue is, especially with "distressed" real estate. Sometimes a simple fix like a shingle can save a house from water damage! Great point, thanks for sharing, John

  6. peter says:

    Homeowners should pay back $ they borrowed; feds should stay out of the business. Must let the market sort it out. And not penalize the responsible majority and subsidize the irresponsible.

    MID has to go away; fannie and freddie and fha need to be broken into 6 or 12 smaller firms and privatized. 20% Down or Pmi need to come back.

    This is how to get the government distortions out of the housing market and allow it to return to a normal and efficient one.
    ph

  7. Angie says:

    First and foremost no one should be selling their home merely because they are underwater. If the consumer can afford the payment they should stay put. Putting your home on the market creates more supply lowering the values and worsening the economy. I would put out such this message.
    Second, the feds should leave the market alone. They are the reason we are in this recession in the 1st place. Frank, Dodd and the other socialists on the hill created this problem. Every time the government gets involved in private enterprise, the economy gets worse. I would leave the market alone.
    Third I would lower corporate taxes, get rid of Obamacare and deregulate (get rid of the hundreds of regulations private enterprise owners must deal with and pay for before they can even market their product. It costs a home builder approx $50.00 in taxes and fees just to apply for a permit). There are far too many restrictions which put undue burden on the US business owners which is why many of them are relocating overseas.
    AND THEN…watch the housing market (as well as all of the other markets) rebound all by itself.

  8. Ken Miller says:

    1. For those who can document that they are unemployed or have reduced income, and if they can document that at some time in the past 5 years they were making adequate income to pay the mortgage, give them an automatic forbearance that reduces or eliminates principal and interest for up to 3 years, with their status reviewed quarterly. The shortage would be added to the end of the loan as a balloon payment.
    2. I know conventional wisdom is that putting 20% down is the only way to ensure a buyer has enough skin in the game to know they are really committed to paying their mortgage. However, the result will be that first time homeowners will have to save up for at least 10 years to buy a house. I'm all for shifting as much of mortgage lending to the private sector as possible, but there is a public interest in making sure well qualified candidates can buy a home with a reasonable down payment, say 3% or 5%. We should not give up on the dream of home ownership in this nation. If we move to 20% down only, this bear market in Real Estate could last for decades.

  9. Jeanne says:

    It seems to me that we used to do just fine with a 95% conventional loan, a 97% FHA loan, and a 100% VA loan. If a buyer had more to put down, it was their option. It has become way too complicated to buy a home. Simplify and make the rules stick for all. Simplify and cut costs. Simplify and cut fraud. The question becomes…do you want loan #1, #2 or #3…a real estate agent might be able to explain loans to their clients again…like we used to be able to do once upon a time…

  10. Mike says:

    Out of control defect spending by the government limits the value of government. Its ability to solve the serious economic problems that may face us for the next 10 or more years are limited. Government should stop wasting money and focus on solutions to improve consumer and commercial confidence in the US economy. Removing the MID would do just the opposite. Here's an idea, Initiate a large tax on imported goods, Corporations creating an increase in permanent U.S. jobs should get a tax break, Initiate a National Federal Sales Tax so all the illegals and income tax evaders contribute to society, Term Limits on the Executive Branch of Government. Etc. Etc.,

  11. Marsha says:

    My solution is so simple. Let everyone who has been paying their mortgage refinance to the lowest poissible rate – no qualifying – no appraisal. If they have been paying what difference does their qulaifications and appraisal make. And their only cost would be recording the new note. Make it 2 – 3% for 5 years then it goes back to their old rate. It would give everyone more money to spend (don't forgot most people are paying their mortgage) and might stop a few forclosures.

  12. Chuck says:

    Reinstitute Glass Steggal (sp) and require banks to write real estate owned to 0 within 12 months. Bar them from trading in the markets for their own accounts.Then banks will have to go back to making loans. Fannie and Freddie to take real estate owned and rent it. This will depress the rental market. However, it will make housing affordable. We got here because lenders stopped underwriting loans and became fixated on fee income. The fraud came about because the lenders didn't do any kind of due diligence. Instead, they pushed to keep the pipeline full.

  13. Joel says:

    The government should insist that banks assist borrows that need asistance with their loans modified to 40 year or 50 year amortizations for a period of five years…..which would result in fewer foreclosures; much lower monthly payments; more people being able to stay and maintaining their homes; and provide certainty for a five year period. At the end of that period the loans would revert back to 30 year notes with their original monthly payment & whatever remaining balance exists based on whatever principal has been paid during the five years period. Easy to implement and administer. And in five years the economy will be much stronger and house values will be stabilized.

  14. Sam Snead says:

    I completely agree with Bob Costanza. I can't believe our leaders can't see that the big anchor on this economy is the housing industry. We have got to get the bad loans off the books in order to turn things around. New Construction and Fair pricing are out the window. Forclosures,short sales,distressed properties are driving the market. Until this inventory can be absorbed our so called "normal market " will not come back. Instead of the bail outs and the tarp money for Banks make the Banks take the hit and move on. The Feds should not allow the Banks to sell these properties for .50 on the dollar just so they can get these loans off the books and not be required to hold money in reserve. The key is to prevent these properties from controlling the market. More should be done with upside down homeowners and people who have lost their jobs to extend workouts . I believe if we get back to a normal market and the constuction starts again not only will the economy get better but the jobs picture will look much brighter too !

  15. Lesley Beever says:

    It does ot matter what is done about housing until the job situation is settled. I would drill for oil, drill for natural gas, coal, and lift some of these 80,000 pages of restrictions on small and large busninesses. Until we have jobs in this country, we will not have the buyers we need. Repeal OBAMAcare and re-do the entire tax system so it is easily understood. Reduce immediately the corporate tax structure and take out all the loop holes. Let those that have health insurance keep what they have and deal with the percent that do not have insurance separately. The housing market is tied to all of these problems. You cannot sell a house to someone who does not have a job or to someone who is afraid he/she will lose his/her job. The rest will straighten out when the busness atmosphere in this country is again friendly. Lesley

  16. Ellen Levy says:

    Many good ideas in this thread. Some others: Many homeowners are in trouble because the banks changed the rules, and for no other reason. If Treasury institutes some cushioning provisions, many "troubled hoemowners"–who became "troubled" because someone changed a definition–will be troubled no longer. I agree that interest rate write-downs should be easily obtainable. The bankers' rebuttal is that the "investors" will not allow it. There is no law that "investors" have to have a certain return. If there is a problem with private or institutional investors, legislation should be enacted to change the rules for them.

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