Reply #27: There are a couple of ways it can be addressed. [View All]

[Toucano]

I like the idea of a 21st-century Homestead Act whereby the federal government buys the mortgage from the lender at 60 cents on the dollar.

Feds now own the note.

Homeowner signs a contract with HUD to maintain the home, property taxes, etc. for a period of 5 years during which time homeowner cannot sell the property. If the homeowner moves during during the 5 years, they forfeit any claim to the property.

But if the homeowner stays, at the end of 5 years, they can sell the property for no less than the amount the government paid for the note. The homeowner could retain any proceeds from the sale in excess of the amount indebted to the feds.

Without having to pay for housing, millions of unemployed and underemployed could direct their small incomes to living expenses, education, and other costs of living that help stimulate other economic activity. The homeowner would also receive no income tax refunds during the 5 year period.

Everybody wins or at least mitigates their losses.

* Lender gets something and avoids the expense of foreclosure.

* Family gets to stay in house.

* Other property owners in the neighborhood don't have to suffer the blight of a rash empty homes driving down the value of their properties.

* Money spent by feds on unemployment benefits doesn't become additional bank bailout money, but instead is spent on new purchases. Jobs return to fill demand created by new spending.



There are other ideas, too, however. I rather like the one that turns some wealth DOWN the ladder rather than UP the ladder for a change.