When the family moves out of the foreclosed-upon home, the value of the property immediately begins to decline.  The yard ceases to be cared for.   The vacant houses are often vandalized.   The properties are often ransacked and reusable material such as plumbing and electrical items are stolen.   Many of the houses are completely destroyed.   Where an inhabitable house once stood, there all to often is nothing left but pile of rubble with a roof on it.   At that point the house  must be torn down.  The cost of the tear down is ten to twenty thousand dollars.    After tear down, what does the bank have?  ---  a vacant lot and a receipt for the ten to twenty thousand dollar tear-down cost.  

The family is homeless.   The city has lost another portion of their tax base.  This reduces the city's ability to to provide schools and other social services.   In it's place the city has tons of extra trash that must be disposed of.   The value of adjacent property also goes into decline further reducing the tax base.   The infrastructure of the nation takes still another hit.   It declines by one more small step.  The bankers  end up with pennies on the dollar as returns on their loans.     Everybody loses, even those who, in the short term, appear to gain.  

Every day, this scenario is being repeated across the country hundreds of times.   For example, in the second quarter of 2008, (April, May, June)  739,714  property owners in the U.S. received foreclosure notices from lending institutions.   During that same period 220,000 foreclosure proceedings were completed.  (Statistics from RealtyTrac.com)   

The Future is even bleaker.   About ten million home owners, presently  have mortgages on their homes that exceed the value of the home.  As the real estate bubble continues to deflate, the number will increases significantly.   Under these circumstances, many more home owners will choose or be forced into foreclosure.  

Three Ways  to 
          Significantly Reduce 
                       Bank Foreclosure Losses

The First Option:   Suppose we make a simple, but profound shift regarding the loans on properties in foreclosure.  Instead of evicting the residents, suppose they were offered the opportunity to stay in the property as renters until the property was sold to a new buyer.   The rental contract would stipulated an until resold only agreement.   Receiving the renter agreement benefits would be contingent upon the renter taking care of the property.   If the property is not cared for, the financial incentives offered below would be forfeited.

Each situation would be analyzed independently and the appropriate rental fee established by fair market value.   If necessary to resolve any seemingly irresolvable problems, an independent arbitrator would be brought in.   The resolutions would be reached by unappeasable,  binding arbitration.   

The rent money would not be not applied against the loan.   Instead, it would put into a property management fund and used to keep all the bank's foreclosure properties in good repair.   This process would significantly reduce the bank's foreclosure losses.   It would also reduce the problems in re-selling the property.   It would also solve the immediate living circumstances the former owner.   The property would also continue to be a part of the city's tax base.

Part of that savings could be passed on to the renter in the following manner:   When the property is sold, the renters would be given sixty days to vacate.   The renters would also be given a rapid-vacate incentive of 100 dollars per day.   For example, if they vacated the house in twenty days, they'd get 100 dollars times the forty days they were not in the property which equals $4,000; for vacating in thirty day, they get 100 x 30 = $3,000; for vacating in forty days, they get 100 x 20= $2,000.    

The bank would also assists the renter in finding a replacement residence by paying the  first and last months rent plus the security deposit at the former renter's new residence.   These financial incentives would be contingent upon the renter taking care of the property, paying the rent on time, and vacating the property during the sixty day move-out period.   

The Bottom line:   

Bank/Lender:   This process would be significantly less expensive for the lending institutions than the present method of dealing with foreclosure homes.   

Owner/tenant:  Former owners would not be evicted on a thirty day notice with no concern for his/her well-being.  

Government/tax payer:  NO government bail-outs would be needed.   NO government deficit spending.   NO mortgage-caused increase in inflation.    Banks would cover their own losses.   

Society at large:  The American infrastructure would be maintained.   Everybody Wins.   

If you can find reasons why you believe this process won't work,  or if you have suggestions that would improve this proposal, we'd love to hear them.  Contact us.   

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Simply Stop  or Postpone Property Foreclosures 

The Second Option:   The banks, or  lending institutions, or whomever else was administering the loans could end the foreclosure problem overnight if they were willing to do so.     Suppose they said,  " Just keep making monthly payments at the original level and we'll give you a two year moratorium on the balloon payment or on the increase in interest rate.   We will not foreclose at this time.  At the end of two years, we'll do a  re-evaluation of your loan and your ability to make payments."    

Third:   The banks and lending institutions could  reduce the interest rate for those borrowers who simply can't meet the repayment plan.   They could also offer Simple Interest plan which favors the borrower, as distinct from the complicated, compound interest plans now in effect that favor the lenders.

Fourth:   The government could say to the lending institutions,  we are forgiving your loans, you must, in turn, forgive those who owe you money.   That's a principle right our of the Christian Bible. (Matthew 18:23-35)     We have a president who claims to be a Christian.   Let's invite him walk his talk.   

Five:   We could also do something similar with credit card debt.   For example, what if we rescinded the legalize loan sharking in the financial industry and made the professional lenders follow the same rules that you and I must follow.   If you or I charge an an interest rate over ten percent, we are subject to criminal prosecution.   The rules should also prohibit them from circumventing the intent of the law by re-labeling the money they charge and calling that money a fee for this or that. 

A combination of these five options would resolve the vast majority of the home foreclosure problems.   ]

Mediation:   In addition, set up a mediation board in every county in the country similar to what was done during the Great Depression of the 1930's.   The function of the mediation board would be to stand between debtors and creditors and work out solutions based upon the specific requirements of both lender and borrower.   

The county foundation structures suggested in the How to End the Home Foreclosure Crisis  page could be the structure out of which these mediation boards function.  

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Return to the Prior Pages

Concept Summary ²  ---   If humans are going to reverse global warming before it becomes unstoppable, the process requires making major economic changes.   The first step in this transformation process is to provide you with an overview of the potential.

Resolving the 2008 Financial Crisis   ²  ---   In the present financial crisis, October 2008,  we cannot solve the problems created by deficit spending with more deficit spending.  Instead of treating  symptoms, we must be totally honest and solve this crisis by going to its core, to it's root causes.   

 The Financial Bailout    ²  ---   The who, what, when, why, and how of solving America's Financial Crisis.

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The Current Page   ---  (You are Here)

 A New Way to Process Home Foreclosures  ²  --- A way for the banking system to process home foreclosures so that everybody wins.

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