From Zerohedge:
…we will cut straight to Levitin’s somewhat unpleasant conclusions: “Our speaker predicted that more and more lenders are likely to stop their foreclosure processes in both judicial and non-judicial states. He also expects more states’ attorney generals to get involved. At the federal level, it is possible than banking regulators might step in as there is legal and reputational risk for the banks involved. Ultimately, if these issues do in fact escalate, the Administration may try to broker some sort of settlement…
What will the deal be? Possibly a program of writing down the balance on the “underwater” mortgages. I’m not too sure of this, as it has a gigantic potential to backfire as those who are not underwater won’t get any benefit, and might not be pleased that others – often written off as deadbeats in one form or another – do. There is a lot of latent anger, I think, revolving around the whole housing crisis and I don’t think there ever will be an easy way out of it…though that will not stop Banksters and Bureaucrats from thinking there is.
Looking past the immediate problem, there is clearly a need to completely reform the way loans are written, the way mortgages are dealt with over time, and what mechanisms there are for when a homeowner can no longer afford the mortgage. A better power balance needs to be struck between borrower and lender, while protections have to be put in to place to lessen the chances of speculative bubbles in housing. Some of my ideas in this:
1. Allow for a genuine “deed in lieu of trust”. You can surrender your deed at any time, but that doesn’t relieve you of the financial burden if the sale price of the home doesn’t equal the mortgage amount. My attitude is that the loan is secured by the deed, and that means the bank either gets paid the money promised, or obtains the deed…not both. Allowing people to surrender their deed without penalty would put the borrower on a more level playing field with the lender and make it more likely that when problems arise, a mutually agreeable resolution is found.
2. Eliminate all taxes on the profit of a primary home sale taking place after 10 or more years of ownership – but tax at 50% the profits of any sale in less time. This will take away the incentive to try and “flip” houses rapidly and thus destroy the chances of the rapid price rises we saw just prior to the collapse. This doesn’t prevent an investor from doing what he wants, but it does make it less likely that a home owner will start to view his home as a piggy bank. Exceptions can be made if a home owner can demonstrate that the sale was due to a move of more than 50 miles from the current home location (this to cover people who are transferred or find employment outside their current area of residence).
3. Forbid the sale of mortgages. The bank that writes the loan, keeps the loan. It stays on the bank’s books from start to finish. This will eliminate such nonsense as the “mortgage backed securities” which played such a huge role in the bubble and the collapse, as well as forcing banks to actually underwrite their loans, rather than just shove through whatever they can, knowing they’ll palm it off a month later.
4. Forbid the seizure of a primary residence for failure to pay taxes. This is what I call the “castle” exemption – as in “a man’s home is”. Home ownership carries with it great responsibility and our primary residence is supposed to be a semi-sacred refuge for the family and the individual against the world. No one should lose their home to the government for failure to pay taxes – yes, you can put a man in jail for not paying, but his house should still be his when he gets out. The concept here is to invest in home ownership the understanding that its not just an “investment” but is, instead, a hearth…a man’s foot of earth from which he can face the world. Make home ownership that kind of ideal, and we’ll go a long way towards restoring a bit of sanity in our society.
Whatever we do, we can’t go on as we are. Whatever idiot band aid our Banksters and Bureaucrats use to get past “foreclosuregate”, it will be up to we, the people to think about what has happened, what we want and how to get there. My ideas here aren’t written in stone, but we should all turn our minds to the problem, because solving it will play a huge role in the future success of our nation…or of our failure, if we get it wrong.
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