*I have edited this post for clarity*

I’ve had this on my mind for weeks now. All this talk about the “hope” or “lifeline” plans to help homeowners and the stimulus checks to boast the economy has me going crazy!

First the checks. There are so many flaws with this mass amount of cash being flushed into the hands of America. A very large percentage of people that responded to various polls said that they would not spend it, that they would indeed save it or use it to pay off bills. Now I am all for saving and paying off bills with extra money, but how will this help the economy? It was explained that the money would help the economy by allowing people to splurge and buy more consumables… therefore giving the economy a boost with this explosion of cash. Hmmm, who really thought that this would work. Aren’t we facing a recession (if we aren’t already in one) partly because people are scared to spent?

Second, the “miracle programs” that are going to save homeowners from loosing their homes. What a load of crap they are serving. Without getting into my personal thoughts on how this housing mess started, or whose fault it is, the reality is that there is a problem and it needs to be solved as cleanly as possible. The truth is that these programs were created with and by the lenders. They help the lenders… oh and a very, very, very small percentage of the homeowner they “claim” to help. The paperwork alone that the homeowners have to fill out is almost impossible to complete and the end result is almost always going to be frustration on the homeowners part. My favorite part is that you have to be at least 60 days late but not more than 90 days late. I want to know how many homeowner are current on their mortgage payments, but are maxing out all their credit cards and living in poverty levels just to pay their mortgage and minimum payments on their credit cards. In order to qualify they would need to let their mortgage go late. If they did that then their credit scores will tank, making their insurance payments higher and triggering “universal default” on all their credit cards… and then what if they still don’t qualify for the mortgage rate reduction or other “miracle programs”? Oh and let’s not forget the late payments fees on their mortgages! There are so many restrictions to these programs, and once again it is a “reactive” solution as opposed to a proactive solution. Pretty much it offers to possibly help the ones that are already in deep trouble but offers nothing to the ones that could easily be saved before it reaches emergency status. Why not help them both? Both are deserving, if only to help the whole countries economy.

I’m one that always says that if you are going to complain about a problem you better have a suggestion for a solution. I will admit that I do not have all of the answers for this problem, but I do have a few suggestions.

1. Don’t send out the checks. Our government does not have money to be sending out in hopes that it stimulates the economy. What part of “don’t spent what you don’t have” are we missing? If I thought it would work it might be a good idea, but it most likely won’t and then were will we be? More in debt. Let’s spend this money on something that will really help.

2. Make a real plan to help homeowners keep their houses. Ask a large amount of homeowners what it will take to help them save their houses. Is it a lower rate, making their loans into 40 or 50 year loans, putting anything in the rears onto the end of the loan, or all 3 or different things? It’s hard for those of us that are not in the position of loosing our homes to know what these homeowners really need. I can only imagine how “hard” it was for the writers of this plan to “know” what would help the HOMEOWNERS, when they just collected a HUGE cash bonus!

3. Here’s the kicker. Use the money that was to be sent out in checks to the masses as bonuses to the lenders when they save a person from foreclosure. Offer assistance to all homeowners who need it. Limit the eligibility to homeowners that are owner occupied, not just those with owner occupied loans, conventional, non-conventional, prime or sub-prime, arm or not loans. Offer assistance to all home owners that actually live in the property regardless of the type of loan they have.

Possible solutions for owner occupied properties include:
- rate cap of 6% or even 7% (there is still lot’s of profit in those numbers) for 5-10 years
- you do not have to be late to qualify
- no financial qualifying, no forms, or berating by lenders. You already qualified to purchase the property. You want to save it, and you live there. That’s enough “qualifying”. This will greatly reduce the amount of REO’s (bank owned properties) and will help stabilize the real estate market.
- you are “kicked out” of the program if you ever go 90 days late and foreclosure proceedings can resume exactly where they where when you entered (if you were late).
- the program participation will not be noted on your credit report. It is very important that the homeowners credit is not negatively impacted or we will need another program to save homeowners from credit card and loan “universal default” or raising rates on insurance and other credit score driven products. There is already a credit crunch, let’s not add to it.

Sorry investors (I’m one too) but we need to save the houses we actually have owners living in… can’t ask for too much, but I did include the provision if you choose to move into a prior investment property… this could help!

Lastly, we need to remember that this needs to be an incentive based program to the lenders. The lenders are in it for money, it’s a business. It would be un-American and down right illegal to force lenders to do any of this. The choice must be theirs to make and we need to be able to reward them financially for doing this. We could use the money from the checks and offer tax incentives to encourage their participation. They would need to calculate if it would be better for them to take the loss from a house through foreclosure or short sale, or the loss associated with offering a lower interest rate and lower payment and a longer return on their money. The pinch will be felt hardest by the private money lenders than the large corporations. It might be a huge loss for the lenders today, but with a stabilizing real estate market they can get the REO’s off their books and get back to lending money like they are supposed too! For the homeowners, they would win today and in the future.

*Added-

POINT 1. I wrote this from the point that the government had decided that they will be offering some sort of assistance and that not offering assistance was not an option. I felt that if they were set on offering "help" than these were my thoughts on the help. Not offering help at all was something I actually thought *might* be a better option (I would need to think that through more), but I wrote this from the view of it's already going to happen, so at least it should be done in the best possible way.

POINT 2. By no paperwork I am speaking of the typical qualifying paperwork, i.e.. bank statements, tax returns and the loan application. NOT the disclosures. Disclosures ABSOLUTELY must still be provided. My feelings were that the borrower already qualified for the loan and that it's obvious that the borrower now can't make the payments regardless of what the paperwork will show. At this point if the borrower is wanting to save the home than who cares about the qualifying paperwork. It would be great for everyone if they could save their home, including the borrower, lender and the local real estate market. By not having to do the qualifying paperwork more borrowers will be able to save their home. Again all disclosures must still be completed and signed. Disclosures will state the terms of the loan modification and the borrower must read, sign and more importantly understand the terms.

POINT 3. I removed any reference to the war. It was not my intention to start a dialog about the war. I mentioned the war as a reason as to why the government can not afford to throw away money. I understand that the war also creates money via jobs and I also want all of our soldiers back. I am not against the war. I am not "for" our soldiers being gone for so long. I am not "for" the huge amount of money we are spending there. I am not "for" a specific withdrawal date as I fear it would put our soldiers in more danger and create a new threat. Thank you for all the emails requesting my view on the war. I hope I confused you even more with these comments. I do not feel more view of the war is warranted in regards to my very strong view on personal finance.

POINT 4. Again, I am very pleased that this post got people thinking. I really do appreciate everyone's views, and I want to thank you all for reading my blog. Please keep the comments coming.