How much longer can we expect foreclosure rates in Connecticut to increase?
The issue of timing on the continuation of foreclosures is more event driven than it is date driven. We will see a reversal of the trend when a comprehensive plan has been proposed and implemented by the state and federal government. So far, the significant amount of time and resources has been spent on shoring up our banking system and preventing our markets from collapsing. Now it is time to turn attention to home price stability and job creation.
Should the growing foreclosure problem be attacked on a state or federal government level?
From the state level, governments need to be prepared to react to any stimulus plan put forward by the Obama administration and have projects identified that can create jobs immediately. In addition, state governments need to aggressively work with private sector employers to insure their stability and growth. On the federal level, we need our government to diligently work through an economic recovery plan with bipartisan support. The plan needs to provide a stimulus for the economy and a remedy to the existing credit crisis. The remedy needs to include lower rates for purchases of homes in 2009 and 2010 and an increased tax credit for all homebuyers, not just first time homebuyers.
What type of legislation or plan does the state or federal government need to adopt in order to stem the growing foreclosure problem?
There needs to be a shared equity mortgage program implemented immediately that will enable distressed homeowners to refinance out of there existing mortgages with a payoff amount that is based off of a predetermined percentage of current market value. The new government sponsored mortgage will then have monthly payments that will be based off of the borrowers current verifiable income. If these payments amount to less than the full monthly payments that would otherwise be required to service the loan then there will be some component of negative amortization. In exchange, the new mortgage lender will be entitled to share in the equity appreciation of the home by getting, in addition to the outstanding principal balance, a percentage of the sales price when the home ultimately sells.
