A plan to solve the real estate crisis

Letter to the Editor

By Inman News, Monday, January 24, 2011.

Re: ' "Bond Vigilantes" intercept economic recovery' (Jan. 21)

Dear Editor:

The Problem:

1. Homes are being sold after foreclosure or short sale far below actual market value.

2. These homes are flooding the market, which has been driving down the market value of surrounding properties for the past five years.

The Solution:

1. "Sell" the house to the current owner at current market value instead of foreclosing.

2. Erase the original mortgage and start a new mortgage at the current market value only if the current owner agrees not to sell the property within five years. The new loan would be contingent on agreeing to paying back the original mortgage to the company if the owner sells the house before the five-year period ends.

3. Mortgage companies would be receiving the same amount in monthly payments from the current owner as they would from a new buyer -- what's the difference who makes the payments? It's going to be sold for a reduced price anyway, so why not "sell" it to the current owner if the owner can afford the new payments based on current value.

Everybody Wins:

1. Mortgage companies would save money by not having pay for the foreclosure process, not having to pay property taxes during the foreclosure process, not having to pay the staff that is needed to manage all the distressed properties the mortgage company has, not having to pay real estate commissions, and not having to sell a home that, in many cases, has been damaged by the former owners. Also, it would not take months to sell the foreclosed property. Instead, the mortgage companies would be receiving monthly payments towards a new loan, instead of nothing on the original loan.

2. The property would continue to be maintained, instead of deteriorating and bringing down the value of neighborhood homes.

3. Mortgage companies will continue to receive the exact same mortgage payments that they would receive if they sold the home to another person.

4. Owners of real estate would keep their homes for a minimum of five more years.

5. This would greatly decrease the real estate inventory of short sales and foreclosures, helping to start the return of a normal real estate market.

6. The economy would begin to recover. This is a no-brainer.

Russ Eppen
Realtor, broker, salesperson
Coldwell Banker Best Sellers Realty
Dayton, Nev.

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Submitted by Mary Kaye Coriano on January 24, 2011 - 3:06pm.

Exactly...That is the same solution that I thought about a few years ago. I thought it could solve many problems in the housing market and this stablize it, if the current owners could substantiate they could pay the new mortgage. But what I have discovered is that with REO's and short sales the Feds are guaranting 80% - 90% of the difference betwenn the sales price and the orignial loan amount. So say someone has a $500,000 mortgage and the bank bundled and sold them at .70 on the dollar say for $350,000. The property is sold either has a short-sale or REO for $250,000, one would think the bank is taking a hit of $100,000. But the feds are giving them 80 - 90% of the difference between the the original loan amount of $500,000 minus the 250,000(short sale price) which equals 250,000. So 80% of 250,000 is 200,000. So the bank gets the short sale price of 250,000 plus 200,000 from the feds.So they are making money that is why we are all facing this crisis. So they paid $350,000 and are making 250,000 on the short sale and 200,000 from the feds; for a profit of 100,000. As long as this continues the market will never recover! And to make matters even worse, I have seen banks ask owners who sell short sign a primissory note! God figure!