The "silver bullet" to solve the housing crisis is to solve it capitalistically. Taxpayers, homeowners including "want to be" homeowners know that owning a home is a capitalistic business transaction between two parties not a socialist right or a taxpayer paid right.
General Facts:
1- The American Dream is buying a home to live in with the implied guaranteed of the initial down payment and monthly capital investment (mortgage payment) being returned thru the building of the homeowners equity(savings) and for the chance of earning additional money from any appreciation in value, capitalism.
2- An investor invests in a mortgage or mortgage backed security for the implied guaranteed of a return of their capital investment with the ability to earn money on the interest being paid, capitalism.
3-- With the decline of housing values, investors were losing millions of dollars in guaranteed losses from the difference between the lowered distressed sales price of the house and the higher outstanding mortgages,capitalism. With the same decline of housing values, it became financially better for the negative equity homeowner to cut their losses by defaulting than remain a negative equity homeowner, capitalism.
4-Which is why the financial industry changed the standard operating practice of "don't pay be foreclosed on" to "let me modify you, if you have negative equity, not if you can't afford your payment" by giving a financial benefit/incentive to the negative equity homeowner of a lower payment or a principal reduction to remain a negative equity homeowner avoiding a potential and possible negative equity foreclosure from occuring that would result in a guaranteed financial loss to the investor, capitalism.
5- Regardless of the individual homeowners personal financial status, it is ALWAYS financially beneficial to the investor to modify any negative equity homeowner than to foreclose, as proven mathematically with a positive net present value. A guaranteed loss to the investor occurs if the foreclosed sales price of the property is less than the outstanding mortgage amount due, referred to as a negative net present value.
6- An unintended consequence of massively changing the standard mortgage clause and standard operation of business was a NEW PRECEDENT was created and set. Proof an industry wide change occurred is in the volume of modifications issued, over 5 million modifications were issued for the sole purpose of avoiding the investors guaranteed losses that are all proven by the REQUIREMENT of a positive net present value (+NPV) to the investor, not the affordability of the homeowner.
7-The unrelated socialistic stipulations of having a reduced income, being over leverage, having excessive charge cards or bills, how many of the neighbors defaulted, or having an adjustable rate loan payment reset, does not change the math of a positive net present value to the investor or the amount of the investors financial loss. All of the imposed stipulations are for the sole reason of excluding the majority of negative equity homeowners from receiving a modification leaving the homeowners and the economy in financial limbo to protect Wall Street's anticipated profits.
8-The recent settlement of the Attorney Generals violates existing law by not enforcing that all similarly situated parties with the same mathematical +NPV are entitled to the same (across the board) change made in the standard capitalistic operation of business, with a similar financial incentive/benefit or a breach of contract occurred as well as a violation of the homeowners implied and reasonable reliance that all of Wall Street would operate in good faith and fair dealings.
9-While the settlement does help about 1 million of the current 11 million negative equity homeowners, our pension and tax dollars will still experience the losses from the difference between the higher outstanding mortgage amount(s) due and the lower distressed sale price on the remaining potential and possible pool of 10 million negative equity homeowners for years to come without having a fair plan to modify every negative equity homeowner regardless of their financial status to avoid a negative equity foreclosure.
10 - As the banks and the government release the " shadow" or "ghost" industry of the current 6 million delinquent, defaulted or foreclosed on homeowners into the housing market at distressed sales prices, all surrounding real estate values will continue to decrease increasing the financial losses of our pension and tax dollars AND increasing the amount of homeowners affected by negative equity, a deflationary cycle.
*Sign the Unitedinprosperity.org petition to stop the "misrepresentation" that affordability is why a modification is issued allowing the holdings of the government and Wall Street to violate the principle of "honest and good faith dealings" using "predatory mortgage servicing practices" and "unfair and deceptive business practices" by taking "undue financial advantage" of similarly situated (negative equity) homeowners who are paying or can afford to pay by restricting or denying them the same moral, ethical and legal entitlement of a modification violating numerous consumer, banking, civil, tort and business laws to maintain Wall Street's profits.
* Sign the Unitedinprosperity.org petition for a true Change We Can Believe In by giving every negative equity homeowner a similar modification creating over a six billion dollar monthly stimulus that is not from the taxpayers.