Homeowner Security Plan for Middle Class Homeowners

E. Lecia Keaton, Yahoo! Contributor Network
Oct 1, 2008 "Share your voice on Yahoo! websites. Start Here."

The government may not want to be in the mortgage business, but for a certain percentage of the population--- they are never going to be wanted or desired by the private mortgage industry for whatever the reason. These people still should be able to purchase a home in a normal area, for a reasonable amount of money, and have a chance to own a home. And I think if a program like this is run by the government or the non-profit sector, then the profit motive in ignoring certain populations, people of certain income levels, and people who may be redlining victims in both urban and rural areas can be eliminated. The American dream can be protected, but maybe reapproached in a way where it is accessible to all people without having to be reliant so much on private entities who see no profit motive in dealing with certain populations in certain areas.

Good luck with everything. And I am proposing this because I do not believe FHA alone is the way to go because it involves the for profit private sector and some people do not qualify for FHA. It is important to allow people to deal with the government directly or deal with the government via a non-profit agency like a community bank or community credit union, and also for people to be given set criteria that they can strive to reach versus it all being a mystical computer process. Also, there are some people out there who are off the grid, as they have no credit and live life on a cash basis. They should still have access to credit for home ownership too, without having to go thru a private lender process where they are going to have deal with people going thru changes who likely do not want to deal with them who put them thru the runaround.

The biggest reason I am proposing this, is that many of the larger financial institutions are not going to want to have anything at all to do with a certain percentage of the population, and these people should still be able to buy homes in a way where they can feel they are getting a straight deal and are not being taken advantage of. And quite honestly, I think many people will not want to do business with these huge financial institutions that are going to be left standing. In fact, the real estate industry will tumble if these people cannot buy homes. I believe homeownership matters in our society- hence the American dream does include the home with the picket fence. Because of this, I believe it should be treated as something of an earned right that all Americans can access if they qualify to, and they should be able to qualify whether they have a perfect credit score or no credit score at all, but this should be accomplished in a way that is common sense. I believe it was good to open up the homebuying process to as many people as possible. I just believe that it should have been handled differently in the non-profit sector, so that home purchase and refinances can occur based on standardized criteria and be fairly implemented by people whose primary interest is in the person owning and staying in their home, and the neighborhood and community being stable.

Just as the Social Security program was about giving people dignity in old age, the goal of this program would be to give people dignity in the homebuying process, so they are not reliant on for-profit financial institutions regulating their access to the American Dream. But also, it is important that people be able to own homes even if they have problems or past issues. Many people are responsible, then were met with job loss, medical issues, high fuel costs driving everything up to a point they could not afford, and these were things that people could not see coming. It is just their lender won't work with them. And I think the current system was built for a time where people got a job and stayed on it for 30 years. That is not the situation now. So I believe the government or non-profit sector should step in and take more of the lead in terms of helping the subprime population own and keep homes. Opening the homebuying process was not bad, but perhaps there should be options to help people do that more successfully with parties who have an interest in their success, rather than having policies that lead to failure. Many people can make it, if there is some common sense applied in terms of being flexible. As it is, the system does not allow for that.

Homeowner Security Program

LOWER TO MODERATE INCOME HOMEOWNER MORTGAGE PROGRAM

Goals

- Homeownership with dignity dealing with parties running the mortgage process who are about the person owning a home they can afford and maintain, and building more stable neighborhoods and communities with stable home ownership

-Create a program for all Americans, more specifically, low income borrowers/distressed borrowers that is akin to the Veterans Administration program for military members that allows them to buy or refinance a home four times in their lifetime. Reasoning is to allow for purchase and refinance of a home to raise a family in and a retirement home after selling the bigger home; or to buy and refinance an owner occupied residence and second residence; or to allow for refinance of a property out of a private mortgage program to a government program where a private lender will not allow the homeowner to refinance.

Why is program needed?

- given subprime crisis; inability of moderate to low income folks to get mortgages

- ability to have fairness and reduce predatory lending to vulnerable populations by standardizing the criteria for these populations and providing them access to the markets so they can participate in homeownership

- marketplace will ignore these potential homeowners given some may reside in minority areas or buy homes that are below an amount that a private institution would want to handle

- to ensure the availability of credit to populations likely to be in redlining areas and to housing in distressed areas to encourage community/ neighborhood restoration

- to give Americans with past credit issues, bankruptcy and other problems a chance at homeownership

Program

- create a formula where people can participate in homeownership regardless of credit score/Fico score that is run by the government directly and/or contracted out by the government for a non-profit contractor like a community credit union or community bank to run for the government in terms of doing the lending and loan servicing

- special consideration given to the disabled, the elderly, military veterans and those willing to live in and restore/rehabilitate historic property and/or distressed property and distressed communities/neighborhoods as defined by zip code

- if purchase or refinance is for a second home, add 1% interest to the owner-occupied interest rates

- fix the interest rates by statute, with the interest rate being a set number adjusted every 1-5 years

- if a refinance, allow refinances at 90ltv or less

- if party is upside down in a mortgage, allow refinance based on new/lower property value but require recoupment of equity that was written off upon the sale of the property if such equity is recoverable at the time of the future sale of the property

- require that a person own their home for at least 4 years before selling, unless a life change, job change, extenuating health or family circumstance[1]

- allow for defaulted on mortgage loans to be assumable and assignable with payment of an assumption fee, an assignment fee and a fixed amount for closing costs which is set regionally or state by state (similar to older now phased out government housing programs)

Program Implementation and minimal standards for owner-occupied and second home purchases and refinances:

This program should be implemented by the government directly and/or via community banks or community-based credit unions. In short, this program should be implemented by the federal government and/or the non-profit sector only.

No Fico/ Under 500 Fico/No Job

20% down payment; 9% interest; 30 yr fixed mortgage; 80 ltv refinance