New Homestead Act of 2008
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Proposal:
Enact legislation enabling (not requiring) lenders to allow and keep the current occupants in homes that might to through foreclosure. A quick cost effective deed-in-lieu in stead of foreclosure. The mortgage is exchanged for a Homesteaders Agreement between the Lender and the Occupant
Who Stays:
Current Occupants who agree to enter into a five year equity sharing agreement, The Homesteaders Agreement is with the current lender/servicer. The Occupants will be the current mortgagors who live in their single family residence and who also owns no other residential properties or they may be Renters who rent a single family residence that would otherwise go through foreclosure if the current mortgagor volunteers a deed-in-lieu.
Summary: The Homestead Act makes the lender and the Occupant sort of “like” co-owners of the property for five years. The Occupant agrees to pay monthly rent equal to 30% of their current income, which may be adjusted quarterly as income changes, up or down. The Occupant will start with equity rights of 10% of then current appraised value. This equity interest can only be used as a down payment on a market underwritten loan and only if they buy the the property within 5 years. At the end of five years the property will be appraised and the Occupant may apply the equity to a new mortgage. The Occupant may also at any time negotiate directly with the Lender and make any other arrangements to buy the property as they may agree to.
Benefits:
- Fewer fire sales of properties driving prices down.
- Fewer empty houses.
- Less REO on banks balance sheets.
- Less emotional and financial trauma to Occupants.
- Less systemic trauma to the overall economy.
- Terminates in 5 years.
Drawbacks:
Whatever they are our elected officials should over come them and do it now. And they should look the lobbyists right in the eye and say, “sorry, my constituents come first. Your clients have helped them get into houses they cannot afford and your clients are going to help them stay there”.
Pingback by Will Your Congressman Say This to a Lobbyist? : Hypocrisy.com on 2 February 2008:
[...] Homestead Act of 2008 [...]
Comment by Foreclosure Financing on 6 April 2009:
Thanks for the article.
Greatly appreciated and bookmarked.
Comment by Chief Hypocrite on 9 August 2011:
A trillion$ or two might have been saved had this three and half year old suggestion (Jan 08) been taken up by policy makers. Unfortunately, today, in Aug 11, when brainstorming, the closest the best and the brightest can come to this brilliant innovation, is a dangerous new cut and ugly scar on an old boil. http://online.wsj.com/article/SB10001424053111904480904576498713414380604.html?mod=WSJ_article_LatestHeadlines#articleTabs%3Dcomments