Wow! A Great Plan To Rescue Homeowners Facing Foreclosure. REALLY!


Every now and then, something comes along when I think to myself: Gosh (well, I would probably use a stronger word, but you get the drift), why didn’t I think of that??? I mean, I would have loved to have been the one to invent, say, the airplane, or television (maybe not television) or soft served ice cream, or an iPhone with a battery that could be replaced. But, sadly, I wasn’t. As the title of this article suggests (okay, says) I am about to tell you about a GREAT rescue plan for homeowners facing foreclosure. It is freaking (sorry for my language thoughts) awesome. It is simple. It is direct. It would probably work. And, I am afraid, it is also another one of those things I would have loved to have come up with. I didn’t.

This proposed plan comes via New York Times business columnist Joe Nocera. And, he, too, no doubt wishes he came up with this plan. He didn’t. He is quoting from a dude named Daniel Alpert, who the Times describes as “a founding partner of Westwood Capital, a small investment bank.” He is someone the Times has apparently turned to a number of times in the past for expert quotes.

Of this plan, says Nocera, “…a proposal came across my desk that I believe is so smart, and so sensible, that I hope our nation’s policy makers will give it a serious look.”

Okay already. What’s this great plan????
The plan is, a law would be passed that “encourages homeowners with impaired mortgages to forfeit the deed to their lenders but allows them to stay in the homes for five years, paying prevailing market rent,” says the Times article. In turn, says the article, quoting from the plan, “the lender would be forced to accept the deed, and the rent. After five years, the homeowner-turned renter would have the right to buy the home back, at fair market value, from the lender.”

The article goes on to talk about why this plan would be so good for the homeowner, the bank and the country.

Most important, it would create a sort of “time out” for five years during which homeowners would presumably get their financial cards in order, banks would be in better shape, and the global fiscal crisis upon us would have long been a distant and very bad memory.

As we have been saying here for some time, the Times article raises the key question: Now that we have “saved” Wall Street, isn’t it time to “save” Main Street?

The current mega bank bailout using all of our money only helps distressed homeowners indirectly, and, even that is questionable. So far, banks show little to no sign of coughing up more mortgage money and rates on fixed rate mortgages have gone up and not down in recent days. Doesn’t sound like a rescue plan for Main Street to me!

I agree with Joe Nocera that this proposed plan is far better than anything John McCain or Barack Obama or President Bush (well, okay, we can discount him right away) or the Congress has thus far come up with.

It makes sense. It would probably work. It is fair to all sides. And, sadly, that is why it probably doesn’t have a chance to be put into action.

Photo Credit: david.nikonvscanon

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. This idea is innovative and noble but I’m afraid it wouldn’t work and
    here’s why:

    1. In many parts of the country where the housing market has been
    somewhat stable like Texas, Tennessee, Oklahoma etc prevailing market
    rents are pretty much on par with what a homeowner would payif they
    owned the place.Now if the homeowner is having difficulties making his
    current mortgage payments, he would also have an issue paying the rent
    under this plan.

    2. If the homeowner turned tenant did not make his rent payment I
    would assume that the bank would evict them from the property.
    Wouldn’t this put them in the same position that they’re in now in the
    sense that if they wanted to, banks could opt to rent out their REOs
    instead of trying to liquidate them.

    I think this plan is along the right track of thinking but its effects
    would be limited to areas heaviest hit like California or Florida
    where mortgage payments significantly outpace prevailing market rents.

  2. Dear Houston Real Estate,

    First, you might have noticed that in cases where the housing market has been stable such as Texas, Tennessee, Oklahoma etc the plan would not be required and therefore your criticism is irrelevant.

    Secondly, if the whole thesis behind from my point of view having actually read it, is that the rents would be sufficiently less than the mortgage payments and overall cost of upkeep that the homeowner is currently breaking his back to pay. If what you say were to happen in a few cases, however, the people who are struggling to make their mortgage payments are usually the same people who were dumb enough to enter into those contracts in the first place and therefore they deserve a bit of the consequences.

    Lastly, if you look at the actual statistics, nationwide market rents are on average 26% below the market inflated “value” of these homes.

  3. You mention “the bank” as the owner of the mortgage. Frequently (if not most of the time) the bank is only the servicer. The mortgage itself has probably been securitized, cut up into pieces and sold to investors and investment funds around the world. It could be almost impossible to find the actual owners of even one mortgage, let alone thousands. It’s a great plan in theory, the reality is that it would be almost impossible to execute.

  4. First, you might have noticed that in cases where the housing market has been stable such as Texas, Tennessee, Oklahoma etc the plan would not be required and therefore your criticism is irrelevant.

    I have to disagree. Even more stable areas, foreclosure levels are still quite high. If the whole purpose of the plan is to help homeowners in trouble, there are plenty that could use such help in Texas, Tennessee and Oklahoma. My argument was that in these areas, such a plan would not be as effective as in certain others where the disparity between market rents and market mortgage payments was significantly higher.

    I think the plan could have extremely positive effects in certain areas while being equally ineffective in others.

  5. Angelica Miller on

    What happen went home loan people don’t help and you try to work with them lowering your payment and they say you don’t make enough. We are making some kind of payment what will happen to us.
    My husband check are getting lower and lower by the month and we don’t want to lose our house.
    What are our opiontion? We been trying and getting no were.

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