In this morning’s Sunday edition of The Detroit Free Press, Free Press business columnist Tom Walsh takes a look at two “sane” proposals to fix the housing meltdown: a plan from retired Episcopalian priest and head of the Detroit Office of Foreclosure Prevention and Reponse, Stephen Bancroft, and Dan Gilbert’s “A Solution That Works.”
Here’s what Walsh had to say about the plans:
The trick to making such a plan fly politically, Gilbert and Bancroft agreed, is convincing the 90% of homeowners who did not take out risky loans — and who dutifully pay bills on time — that they are not being punished for the sins of others.
Gilbert’s plan would not lower the loan principal owed by borrowers in trouble, he said, because that would be a red flag to people who are already pushing against rewarding irresponsible behavior.
While Bancroft’s plan would reduce the principal in some cases, the government would hold a 10-year lien on properties and reap 80% of the gains if home prices rebound beyond pre-slump levels. The goal is to stop the free-fall of prices, which is hurting everyone in what Gilbert called the “death spiral” in the market.
It’s not necessary to feel sympathy for people stuck in upside-down home loans.
And we need not feel bad for Quicken Loans, which has shrunk from 4,000 employees to about 3,200, even though it shied away from some of the riskiest loan products.
What we need is a solution that helps bring sanity back to housing, ASAP.
You can read the entire column by Tom Walsh here.
To read our complete Homeowner Rescue Plan, go here.
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