Separate the Housing Market from the Workplace/Economic Market..Part II.
The International Institute of Nonviolence
By: Rev. Jermano
As I promised here is Part II in Separating the Housing Market from the Workplace/ Economic Market and my thoughts on fixing our Mortgage Crisis, with the hope of changing the thinking about Banks.
The 2 Loan Mortgage Statue Stability Act:
The way to fix the problem especially for home mortgages is to forget the one loan that is always given to home buyers. What is needed is to give two mortgages to the home owners. Just like we need two arms, two legs, two ears, and really two brain hemispheres to think in this world; we need two loans.
One loan is for buying the house. The other loan is used to make payments on both loans. This way no one ever faces default. Sooner or later the money runs out, but it is enough time to prove a worthy credit history, then another loan is taken to replace it. This can go on indefinitely because banks will always be in the loan business.
This is a key point...... Home values should not be based on equity accumulation. It needs to be based on Credit Worthiness or Credit Appreciation. It is not the value of property assets Banks hold that make them successful. All Banks successes are based upon Credit Worthiness also known as Credit Appreciation.
Banks will not have to worry about losses because investors will look to bank profits from a dual interest accumulation from a 2 Loan Mortgage Policy.
And what will really drive the economy is the ability to write off both loan interest rates from your annual income taxes. Now I don’t know about your thinking, but that is a sizable tax benefit, that can be permanent and real, never mind the current tax mortgage deduction relief rumblings.
I can hear you....well what about the money the buyer has to pay each month? Who watches that accumulation equity process?
Well....the 2nd loan the bank offers in its New Housing Buying Policy pays that to the 1st loan. So it is not really your money it is the banks. And the bank pays the 2nd loan from that loan as well. In the meantime what you get is credit worthiness, while the bank does all the work. Not bad I think.
So as time goes on...the 2nd loan runs out of money as it paid the obligations to the 1st loan, and to itself. Now you must reapply for another loan to take up and replace the 2nd loan where it left off. You now have a new 2nd loan to finish off the process. When the 1st loan is paid off, you will still have tailings left from the 2nd.. But since your credit is so superior because of the constant and uninterrupted monthly installments you can get another loan to make payment on the tailings or left over amount from that 2nd loan..
So what happens at the end of this? Who owns the house? Obviously the bank owns the house, but the bank can not sell it, unless you say it can.
So I will never have equity built up in the house? That's right. But you get instead Credit Worthiness....and that is of more value than equity holdings.
But how about that down payment I paid? Who gets that? Of course you can get that back, when you take out a loan in that amount. Say it was for 50,000 usd. You paid 50,000 usd to get the 2 loan Mortgage Policy financing, and after 25 years all the loans were paid because of your credit worthiness, but now you want 50,000 as your said initial down payment. To do what?
Buy another home....Ok....and you will use the 2 loan Mortgage Policy for that new home....and the procedure starts again.
The point I am making here folks is that our thinking is backward when we place all the value on the Real Estate instead of on the Bank. Land has no value....it is the bank who has the value because it is the place that makes things happen so people can live on that land. When banks have the value they determine real worth toward selling or buying the property.
Finding that real value, has many concerns that determine and reflect the times. Who is in office in Government, where it is located in which city. and how good the services are in certain places. Value is reached by analyzing the values near us...and how far they are.
Is the moon valuable? Yes because it is scarce and hard to get moon rocks. It is probably more valuable than gold..because of helium 3 in those rocks. But then it is so far away you say....it is worthless, and anyone who would pay more for moon rocks than gold must really have rocks in their head right?
See..... it all has to do with understanding value....and who wants it.
But we are talking about homes here for people on earth....yes we are...and I think the concept borrow from Peter to pay Paul has much value.. but the real value is not owning the earth....it is having the good credit worthiness to enter heaven....Right?
I think so...and I say...."amen"
This is Rev. Jermano........
wishing you all the best and hope we pray for The 2 Loan Mortgage Statue Stability Act, getting it passed, and American Banks take the road to success.