How to Stop Foreclosures: A simple plan for complicated times.

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By Stephen Pizzo (about the author) Page 2 of 2 page(s)

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No one is going to get everything they would like out of this. The homeowner would not be bailed out, the bank (or Freddie & Frannie) would still have to sustain loses, just less. And, not every defaulting borrower will even be able to afford the market rate rent and will end up being evicted.

On the other hand, it would help millions. And everyone would gain something. If widely adopted it would produce significant benefits, financial, emotional and fiscal. It would make the current down turn less painful, less destructive and shorter in duration, because:

    * Millions of Americans would be able to stay in their own homes.
    * Banks would avoid being saddled with tens of thousands of vacant homes.
    * Banks could avoid having to absorb the large, painful and the inevitable loses associated with REOs
    * Millions of foreclosed properties would not be dumped to become a glut on an already staggering housing market, properties that would only drive home values further downward causing even more loses for lenders down the road.
    * Neighborhoods would not become vacant-home ghettos, destroying the sense of community that's so vital to healthy families and healthy local economies.

This plan would not save every homeowner, every lender or eliminate all loses for all involved, including taxpayers. What it would do is reduce loses, reduce stress, reduce hardship, reduce homelessness, reduce suicides and reduce the impact and duration of the current depression.

What it won't do is satisfy the appetite of that yawning black, sucking hole that has become the mortgage backed securities and related derivative markets. They won't like The Pizzo Plan one little bit. But then, do we really give a fig what they think, the very people who caused, aided and abetted and profited by perverting mortgage securitization markets?

(Yes, that was a rhetorical question.)

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Stephen Pizzo has been published everywhere from The New York Times to Mother Jones magazine. His book, Inside Job: The Looting of America's Savings and Loans, was nominated for a (more...)

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