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As we all know, the Senate screwed us over in the spring when they took the enforcement mechanism, cramdown, out of Obama's carrot-and-stick plan for stopping foreclosures. Not surprisingly, the plans signed into law without cramdown isn't working. The big bailed-out banks are still taking homes away from people who would have been able to afford them if the bankers had wrecked the economy, and record numbers of families are going homeless.
I have an idea for helping out some of these people and cramming down their mortgage principals that doesn't require legislation. I'm interested to hear your thoughts, see if you all think this is workable and worth pursuing...
The idea, which I'm thinking of as "community cramdowns," is to organize big crowds of citizens and activists, backed by support from local credit unions and alternative banking institutions, to go to foreclosure auctions, buy peoples homes and then give them back to them. The key here is that people would have to keep out other potential bidders. This would require forming an intimidating crowd at the scene of the auction to prevent other interested investors from placing their bids. Hundreds of people, lots of signs and a message of compassion for the struggling homeowners would likely prevent most interested buyers from participating in the auction.
After the home is purchased, it's given back to the original homeowner with a new mortgage from the community credit union at the new, lower principal with fair rates that they will be able to pay back. Just like any other transaction like this, the homeowners would have to show proof of income and display under penalty of perjury that they can afford the new mortgage. This kind of arrangement should work for the same crowd of homeowners that judicial cramdowns would have worked for.
The Farmers' Holiday Association did something like this successfully during the Great Depression with farms that were being foreclosed on. Obviously, there is a lot to be worked out in how to make this work with homes in 2009. But it seems, to me, possible and like the kind of thing we need to be taking on by ourselves given the way our government is completely bought out by the big banks.
Please add your thoughts in the comments. Tell me why this is a stupid idea (or a good one, if it is)...
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