Mark Wisterman's Paradise & Lake Oroville Real Estate Blog

Now, before revealing my answer to kick starting this real estate market, lets do a quick review of where we are today.

Remember, in part one of this two part post I reminded you that this mortgage mess in which we find ourselves has resulted in MILLIONS of home owners (3 million this year alone) losing their homes. Also, recall that I think that a major portion of these displaced former home owners could probably qualify to buy a home today if it weren’t for the fact that their foreclosure or short sale would be reflected on their credit report for the next 3-5 years. In addition, it seems to me that it would be extremely time consuming to attempt to figure out which of these borrowers were sold a “bill of goods”, which ones had no idea what they were doing, or which ones were just plain irresponsible in handling their finances.

My request for what your ideas might be to fix this was answered by one of my most loyal readers, Steve Davis  who wrote:

“One could start the qualification on who gets help and who does not by the ones that put 20% or more down were really qualified buyers – vs the low or no down people who should have never purchased a home.”

I do agree with Steve that we could start allowing those who had originally put 20% down access to new loans. but we still have the issue of credit scores for these people too.  So what should we do?

CREDIT AMNESTY!!!

Let’s simply take every home owner in the Lake Oroville real estate market, as well as anywhere else in America, who has been foreclosed on or had to short sale their home, between June of 2006 and June 2009,  and remove that event from their credit report for the purposes of buying another primary residence.

I told you that it wouldn’t feel fair. And I bet you are thinking that to remove these items from one’s credit report is just going to allow those who never should have been able to buy a home in the first place to get into trouble all over again.

But, I don’t think so.

We all know that it is much more difficult getting a loan today than it was three years ago. Back then, you barely needed a pulse to get a loan. Today the standards are much higher, meaning that many of these people who should never had been granted a loan would not qualify under today’s lending guidelines; effectively weeding them out of the system. Allowing the rest of these people to get new loans would be a huge boost to the market and quite possibly finally put a floor under property values, while not costing taxpayers one dollar.

It is not like this type of thing hasn’t happened before. We have had tax amnesty, gun amnesty, and immigration amnesty in the past, so why not give this a shot? If only 25% of those who lost their homes could qualify today under the amnesty program you would instantly reintroduce over 1 million buyers to the market. Which for you, who are currently fulfilling your mortgage obligation, begins re-inflating the value of homes, as well as restores much of the wealth that was lost when values plummeted.

I now turn this topic back over to you. What do you think?  We really need solutions to this problem. The coveted tax credits run out in just 5 1/2 short months. What do we do then?  Beg for more or come up with our own workable solution?