Proposal for Alternative Mortgage

Proposal for Alternative Mortgage

I would like to propose the following idea as a means to allay some foreclosures, keep people in their homes and ultimately help not only the Wall Street economy but also the people on Main Street America. The Alternative Mortgage would be available to people who don’t qualify for, and or in addition to, the HUD, Hope for Homeowners and other programs.

I believe this plan would be most beneficial to all parties by allowing for the maximum retention of homes by homeowners, maintaining home values in municipalities and minimizing losses to the banking/mortgage industry. The Alternative Mortgage would work something like this:

1. Starting with the date of signing a modification the past due Principal, Interest, (and if applicable) Home Owners Insurance and Property Taxes, be added to the end of the existing Mortgage extending its term. Depending on the financial situation of the homeowner the bank should be required to cede attorney and other associated foreclosure fees.
2. To facilitate keeping people who are in temporary financial crisis in their homes the mortgage payment should be based on a percentage of the household income. Income to be determined based on total household Federal tax returns and reviewed annually. (children living at home under a certain age and or still in college should be exempt unless particular circumstances prevail) This would allow banks to adjust mortgage payments as the home owner becomes financially stable again.
3. In the event of sale of the property or re-financing the total amount of principal and interest due on the reformed mortgage would be due and payable as in the due on sale clause of a regular mortgage.

Example: The homeowners can’t afford their mortgage payments due to the loss of income of one of the household members. They fall behind on their mortgage by 6 months. Their home is worth the same or more than the original mortgage. They agree to pay their mortgage company 25-33% of their after tax income as a mortgage payment while the unemployed person finds work. Their current arrears less late fees, attorney fees and foreclosure fees are added to the end of their mortgage extending the term by 6 months. For the period they maintain the alternative mortgage they provide their mortgage holder with copies of their Federal tax returns for annual review. Their mortgage payment can then be adjusted as their income stabilizes, up to but not more than, the amount of their original mortgage payment. (original mortgage payment with property taxes and insurance $1000.00, Reformed/modified mortgage payment @ 25% of homeowners household income, $750.00. per month with 9 months added to the term of the original mortgage, 6 - $1000 payments to cover the 6 missed payments and 12 - $250 payments to cover the 12 income adjusted payments. At the first annual review the homeowner has sufficient income to resume regular payments of $1000 and the reformed mortgage reverts to a regular mortgage with the additional 9 months added to make up the missed and adjusted payments.)

This would allow the economy to stabilize, people to keep their homes and banks to incur less financial costs than those associated with traditional foreclosures. This would also prevent further decline in the housing market helping to slow the depreciation of house values.