Bailout plan should help homeowners first

As a professional Realtor for the past 14 years, I have never experienced so many homeowners and builders going into foreclosure, or faced with pending foreclosure. I cannot help but wonder if our elected officials have a clue as to how severely this mortgage crisis has affected the average American. This past year I have been at many homes where honest, hard-working, decent people can no longer make their house payments. This is most often due to job loss, medical bills, above-market interest rates, credit card debt and much more. I’ve had many discussions with homeowners about their options in this market, and have looked for solutions. Unfortunately, for a lot of families who can no longer make their mortgage payments and owe more than the value of their home, their options are very limited. The declining market has diminished the value of their home and the equity that was once there is simply gone. For many, the only solution is a foreclosure or short sale, which happens when the sale price is less than the mortgage.

When I saw the crisis coming, I took classes on foreclosures and short sales so I could work to solve the current real estate needs of my clients. But after working many short sales, I’ve discovered that some banks make it very difficult to work out a deal, and it seems that there is no sense of urgency or willingness to work with a homeowner to resolve the situation before the home goes into default.

A case in point: I had a listing where the mortgage owed was $275,000. We had an offer for $252,500 from a qualified buyer. The offer sat on the desk of the bank’s loss mitigator for four-plus weeks. I finally got a counteroffer from the lender for $269,000. But the buyer walked because the bank was unrealistic on the market value of the home. The home went into foreclosure and sold for $227,130, and the bank paid $6,918 of the buyer’s closing costs! The comparable sales found in the neighborhood were all less than $250,000. The house was never worth the loan amount of $275,000 even at the time it was given. All the efforts made to save the homeowner’s credit just fell on deaf ears.

I understand that the banks need to recoup the investment on the assets they own, but what I do not understand is why the bank would be unwilling to accept what the asset is worth when the market value has been credibly established. If the everyday retail seller has to compete with the ongoing foreclosures, why shouldn’t the bank do the same? Between the mortgage insurance on the loan, which pays a portion of the defaulted debt, and the government making a decision to let the American taxpayer bail them out, what possible incentive would the lenders have to work with the homeowner on a short sale to prevent default? Think about it. Their bank assets will most likely be worth more because we the taxpayers are paying for the defaults.

If Congress really wanted to help, they would work out a bailout plan that starts from the bottom up and addresses the prevailing problem, which is the existing foreclosure inventory and homes in preforeclosures. Such a plan could look like this: All purchasers of foreclosed property would get a 4 percent fixed interest rate, only if they qualify for the loan. The result is that foreclosed inventory is bought and prices are stabilized. All preforeclosure mortgages are reset at current market value, and all homeowners are offered a 4 percent fixed rate. When the property is sold, a portion of the equity, or the rate deficiency, is paid back. You could structure different percentages paid back depending on the length of time in the property. These preforeclosures most likely are going to be taken back into inventory by the banks anyway. Why not promote programs to keep homeowners in their homes, instead of adding to the already escalating foreclosure inventory and more vacant homes on the market?

Maybe I am being simplistic, but the bottom line is: Where does the moral conscience of America begin? Is the bailout geared just for Wall Street, corporate America and politicians? What about the American family, who works hard to pay their bills, pays their taxes, invests in a future for themselves and their children? We hired our representatives to lead, manage and make wise decisions on behalf of all Americans, not just the privileged and powerful. We desperately need real leadership. Now is the time to demand that credibility, accountability, and confidence in our economy be restored.

• Christine Topham, a Realtor, lives in Cartersville.