Housing Crisis Solution - Just another day in the mortgage mess

Three weeks ago, I suggested the following housing solution to Senator Clinton's Deputy. I also suggested this to Senator McClintock's office and the Mayor of San Diego's office. Right or wrong, it is just an idea. Note: As I mentioned before, I am not much of a writer, so I hope I blog this clearly.

Housing Crisis Solution:

Does it make sense to declare a State of Emergency based on sabotage? In my opinion, it seems like the fastest way to get money into troubled cities nationwide, just as a Governor or Mayor does in times of major disasters. If an arsonist burns down homes causing billions of dollars in damages, the governor and/or mayor can declare a state of emergency, therefore providing federal aide to businesses and homeowners to rebuild.

The Wikipedia definition of a “state of emergency” is a governmental declaration that may suspend certain normal functions of government, may work to alert citizens to alter their normal behaviors, or may order government agencies to implement emergency preparedness plans. It can also be used as a rationale for suspending civil liberties. Such declarations usually come during a time of natural disaster, during periods of civil unrest, or following a declaration of war (therefore, in democratic countries many call this martial law, most with non-critical intent).

The Wikipedia definition of civil unrest: "Civil disorder, also known as civil unrest, is a broad term that is typically used by law enforcement to describe one or more forms of disturbance caused by a group of people. Civil disturbance is typically a symptom of, and a form of protest against, major socio-political problems. Typically, the severity of the action coincides with public outrage. Examples of civil disorder include, but are not necessarily limited to: illegal parades; sit-ins and other forms of obstructions; riots; sabotage; and other forms of crime. It is intended to be a demonstration to the public and the government, but can escalate into general chaos."

According to the California Emergency Services Act 2006 document, www.oes.ca.gov/Operational/OESHome.nsf/LevelTwoWithNav?OpenForm&Key=Laws+And+Regulation it states, "The state has long recognized its responsibility to mitigate the effects of natural, manmade, or war-caused emergencies which result in conditions of disaster or in extreme peril to life, property, and the resources of the state, and generally to protect the health and safety and preserve the lives and property of the people of the state."

Over the past year, the subprime meltdown has caused a major economic disturbance throughout the US economy; and has altered the normal behaviors of many citizens, investors, and banks throughout this country and worldwide. If this housing mess resulted from unethical lending practices, fraud, and/or speculators, then declaring a state of emergency based on sabotage seems like a logical solution because it will provide federal aide to these troubled cities and homeowners, nationwide. If troubled homeowners continue to foreclose or short sell their homes, then it seems we will remain in a period of civil unrest for months to come. Moreover, if foreclosed homes left vacant, expose these neighborhoods to higher crime rates, then the government should act to protect the responsible homeowners’ and citizens residing in these neighborhoods. Someone has to listen!

The government can word it differently than “State of Emergency” if it means avoiding a panic; however, to be real, it seems like homeowners protested by walking away from their homes, and/or are thinking about walking away in months to come. The political hype has to STOP, in my opinion!

1. Declare a State of Emergency based on Sabotage. This will get federal funding to troubled cities and their residents immediately. This will keep troubled homeowners in their home thus protecting the values of responsible homeowners while keeping neighborhoods safe from crime

2. Set-up these federal loans for troubled homeowners on a 1-year term, at a rate of 5%, and have the payment amortized over 30 years.

3. Troubled homeowners who take these federal loans must pay back the federal government an additional $50-$200/month for the next 10 years; and, in return, they keep their home. Moreover, this will pay back the federal trade deficit roughly $12,000,000,000 over the next 10 years. (just an estimated figure based on one million homeowners)

4. Moreover, with the troubled homeowners making payments on these federal loans and, in addition, paying back the government $50-$200/month for the next 10 years; this relieves taxpayers from some of the financial burden.

5. In addition, a state of emergency will relieve the banks of these bad loans, therefore, allowing the banks to rebuild capital over the next 12 months thus avoiding further write-downs.

A. At the end of the 12 months, the banks will be required to refinance these federal loans back into their portfolios; while these homeowners continue to pay back the government the additional $50-$200/month for the following 9 years. As the home values start to appreciate again, these troubled, homeowners will be able to pay back this debt through their equity, if they wish to do so.

6. It seems like the resources are in place to handle a state of emergency based on sabotage, just as it is when an arsonist burns down homes, therefore this should not be considered a bail-out if positioned accordingly.

7. A state of emergency will give federal aid to cities like Chula Vista, where it is having to layoff 10% of its workforce because of unpaid property taxes due to the high foreclosure rate. A state of emergency will give aide to cities like Stockton and states like Florida.

8. A state of emergency will ensure that both local and state agencies have the necessary funds to pay debt obligations should the foreclosure rates continue to increase. (ie: Chula Vista).

9. A state of emergency will give small businesses and homeowners the necessary aid to stay in business and keep their homes during this time of distress. More importantly, keep responsible homeowners safe and empowered.

How much more do we have to wait for this government to try to get things right without it costing us, taxpayers, more money? I am neither an economist nor an expert on fiscal or monetary policy.

Stay tuned, I have more to share.........just another day in this mortgage mess.