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Clio
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Having not supported Trump in the election, I have been surprised at my evolution into a full-throated supporter of his presidency (though not without ongoing reservations about his temperament). That support has cost me a number of relationships and gotten me in trouble with my spouse on more than one occasion. When going into polite (ie Trump-hating) situations, I always try to avoid the topic. Only when pressed will I voice my opinions. Responses range from bemusement to spittle-flecked rants. I have come to identify with Elaine Robinson in The Graduate at the moment, late in the movie, when Ben is banging on the window overlooking her vows and she looks from one side of the room to the other, at everyone apoplectic with rage. The rage is real. But it is not justified. We have been sold a bill of goods over the past 20 years by both mainstream parties, and Trump is leading everyone to question these decisions before they become permanent. Even if he is wrong on some (perhaps many) things, the fact that he has woken us from our sleepwalk is incredibly valuable. But I don't think he is wrong. Take just the decisions made this week: to add a question about citizenship back to the census form, to prevent many (not all) transexuals from joining the military, and to rescind the "Dear Colleague" letter at DOE. Even my eminently sensible husband says he cannot see anything wrong with any of these decisions, but they have been greeted with howls of anguish from the Left. Good. I prefer an honest fight, and Trump is excellent at starting them.
I think you've really nailed it. There have been no fresh ideas for digging ourselves out of this hole. But I no longer think it's enough to say "let everyone go to the wall." There could be millions of new defaulters reading the news and deciding to stop making payments. We just won't know for a few months, and by then it will be too late. I am not a specialist in this area, except insofar as my husband and I recently did a Deed-in-lieu of foreclosure on our underwater home (I wondered why they were letting us walk...). But it occurred to me that the only way to end this crisis is to ensure that all parties (homeowners, lenders, investors, govt entities) agree upon a path that gives all a haircut but saves the system from collapse. So I came up with an idea for an "Underwater Home Exchange" that would essentially create a parallel marketplace for foreclosed, distressed and shadow properties. Here's how it would work. Homeowner gets lender's permission to put their home on the market for the current mortgage (or less, if the house is in deepwater). Lenders put shadow inventory and bank-owned homes on the market too. Assume participants have zero equity (that's about 11 million households right now and climbing). How will they qualify for a home? Well, just as happens in a regular sale, their income determines what level of monthly payments they can afford. And the equity comes in the form of a "virtual" equity determined by a mutually agreed upon formula based on how much skin they had in the old place (down payment plus principal). So, if our homeowner bought a $400,000 house five years ago with $80k down, and paid about $10k more in principal, we start with a figure of $90k. THey are not going to get all of this back (it's not "who wants to be a millionaire"). Here's my suggestion: divide this number by 2 and subtract any missing payments or property tax. So this family (assuming no missed payments) has $45k in virtual equity. That should be sufficient (assuming someone is still employed) to shift to a new, cheaper house. It can be in the same neighborhood or across the country. Let's go a bit further: the virtual equity can be no more than 20% of the purchase price (again, no free houses) and you need to live in the house at least 2 years or it has to be repaid. No one can buy more than one house on the exchange (no flippers). And first time buyers can use real cash. What are the advantages of this scheme? First off, it immediately restores hope (and a floor) to the national real estate market. It keeps millions of homeowners in the market (without whom there will be no recovery) but does not keep people in houses they should not occupy. It rewards good behavior and punishes bad (no down payment and interest only loan? you get nada). It keeps people making their payments and paying their taxes. It allows for price discovery and quick market clearing. I would love to hear some critiques or suggestions from people in the field. As I say, I have no training in this field, but maybe it's time to let the peanut gallery step up. For the most part, the experts have made a hash of the situation.
Toggle Commented Oct 14, 2010 on Moratorium for What? at Credit Slips
I love the idea of the goats but wonder if people will be pleased with the job they do. It'll hardly be the pristine looking linear patterns everyone has come to expect from a tidy, well-kept looking lawn. Plus not all will see the "green" aspect as desirable (maybe a touch of the hayseed to it). Unless it means a significant cost savings in terms of man hours and equipment, it won't add up to much, will it? Perhaps you could have school kids tend to the animals (like the Putney School in Vermont, which maintains a working farm). And I can just see the headlines if the town moves to sell the animals for slaughter ("Traumatized children fight to save beloved goats"). All in all, the idea has some merit but is probably not ready for the mass market.
Toggle Commented Jun 1, 2009 on A Different Kind of Animal at Financial Armageddon