Some of the biggest players in the mortgage industry will halt home foreclosures while the Obama administration hammers-out a plan to help struggling homeowners. The plan may cost at least $50 billion, according to news issued from the White House. Government-controlled mortgage finance companies Fannie Mae and Freddie Mac, as well as major banks such as JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. said Friday that they are halting foreclosures through March 6, 2009. Citigroup Inc. said it’s halt will extend until the administration has completed the details of a loan modification program or March 12, whichever is earlier.
Perhaps the Obama administration will push banks to restructure loans in a way that benefits both homeowners and the banks themselves. Our idea: offer 40-50 year fixed term loans at low interest rates with a minimum time-limit resale restriction. For example, if a homeowner cannot pre-pay the mortgage for, say, 10 years, the bank will be guaranteed a minimal profit based on a 10 year projection, and the property will almost inevitable increase in resale value simply due to inflation, protecting both the homeowner and the bank.
If you have ideas on how to stem the foreclosure crises by keeping homeowners in their homes and helping banks become profitable, send us your ideas!