Home Protection Program (Part 1)

Re: Alternative to using TARP funds to buy toxic assets

The Problem with buying toxic assets, is two fold. First, what do you do once the Federal government owns them? Do you blanketly forgive the borrowers debts? Individually renegotiate the loans? Auction off the houses? Hold the houses in inventory and pay someone to manage them? That is a lot of money for a lot of bad loans, even at a discount; and it is expensive to own foreclosed homes (and loans that will be defaulting).

Second, how does the Treasury hope to recover the funds, or is this just a way to give banks money, without appearing to give them something for nothing? Since mortgages are sold in “pools” would you be buying all loans in the pool (even ones that have not yet defaulted)? What do the banks then do with the money? Reinvest it? Pay bonuses? Buy planes? Take Seminars in exotic locations? Buy other banks? Or do you have to oversee and watch how they spend the money? (A cumbersome project, that can be "gamed" by using other funds to pay bonuses, now that they are getting federal funds)

A better solution is to understand why the loans are toxic, and use money to make them untoxic, using the coming economic stimulus legislation. This would necessitate much fewer dollars per loan and would enable the borrower to initiate the process before having to go to foreclosure.

My Plan would take advantage of current low rates, and borrowers would refinance with conventional FNMA/FREDDIE MAC/GINNE MAE loans at the current value of their home. Banks would not be the only ones who would be helped, since many mortgages of distressed homeowners are not held by the big banks. Many more distressed homeowners can be helped.

Also, we could avert the next wave of the housing crisis which will come in 2010 when HEL loans balloon. HEL loans are when homebuyers used an 80% LTV (loan to Value) first mortgage and a 20% LTV second mortgages to finance a home purchase, thus avoiding MIP fees (Mortgage Insurance Premiums). These loans will balloon in 2010; the owners will not be able to refinance the equity loan, since there is no longer any equity left.

I think it is important to have another goal of getting the Treasury repaid (my program does that). It just make sense fiscally.

If we don’t stop the drop in home prices now, they are going to crater to absurd levels! (crater is the opposite of balloon, which we are now heading into)

I heard of Citigroups acceptance of a proposal to allow bankruptcy judges the ability to modify payments; the problem is that this is just one lender, and it requires a case by case review by bankruptcy judges. (Of course it took a call from the president for Citirgroup to ground buying a 50 million dollar jet- ABC news 1/26/2009)

I have a proposal called the Home Protection Plan
It is for a program that is more streamlined (using the internet), not needing all the paperwork or expense of a conventional bankruptcy, not needing to have each case reviewed by a bankruptcy judge; it takes advantage of current low fixed rates and gives all servicers & lenders the incentive to address even future defaults, now.

Most importantly, my plan would almost instantaneously end the massive numbers of homes entering the foreclosure market for the next 5 years.


(Go to Part 2)

When you are finished reading, I would be interested in your feedback. Please email me at
CharlieNoSpam-Economy [at] yahoo.com