The Problem Solving Model can be applied to any problem you encounter in life. Let's apply this principle to the crisis we are facing in the Real Estate market. The principle is: Identify the Problem, Find a Solution, Have an Alternate Solution, Implement the Solution and don't forget the Monitor the results to see if Plan B (C, D, E…AA) needs to be implemented. Whatever problem life brings your way try this easy and logical approach and you will be surprised at the results.
We have ID the Problem: foreclosures, decline in value of Real Estate, loss of equity, families losing their home in record numbers, homeless people squatting in vacant properties, raise in homelessness, neighborhoods becoming ghost communities and creating ghost towns, economic flat line, small businesses closing because customers have loss homes, copper being stolen out of abandon homes, stain glass being removed to destroy the character of houses, collapse of the economy, recession moving towards depression, destruction of families, loss of the middle class, increase in crime in a hollow neighborhood because no chance of a neighborhood watch and finally Real Estate is at a risk of depreciation instead of appreciation.
These are some major problems as a result of bad loans. These bad loans were given by Loan Officers with little or no training and some with bad intent. Most states have adopted the policy of doing a background check on the Loan Officers. But this is a relatively new policy within the last 5 years. Before, a person could be fresh out of jail with a record of fraud and become a loan officer. Just think you would be giving all your information to a criminal. These adjustable rate loans have caused havoc all over this country.
The Solution is first cleaning up the industry. The financial institutions need to make sure that the Loan Officers submit to a personality test and screen their background closely. The personality test will identify their character and morale standing. There are many people that have not being caught legally but their character and intent are very flawed and the greed shadows their professional integrity. Loan Officers, Real Estate Agents, Real Estate Attorneys with the title company, Appraisers, Builders, Whole House Inspectors, Mortgage Counseling Companies, Insurance Agents and the Closing Agents are all professionals in this process and should be held accountable and carefully screened to weed out the criminal minded person that prey on the unsuspecting novice. The above mentioned professionals are on the same level as the Doctors, Lawyers, Judges, Preachers, Dentist, Painters, Roofer, Police, Fireman and others professionals you depend on. Most professionals have to have several years of school or intense training, why not the professional that help you make the biggest purchase in your life. The solution to clean up the industry is to have Loan Officers with under 3 years experience have a mentor assigned or create Mortgage Mentors to oversee your terms of the loan and make sure you understand the “Good, Bad and Ugly” of what you are signing. Some Mortgage Counseling Companies tried to do this but with little or no background experience over 5 years as a Loan Officer. The Mortgage Mentor will be a Senior Loan Officer working in the day to day industry getting tabs on the pulse of the Mortgage Industry, they will be paid a consulting fee right on the settlement sheet.
Another Solution is to eliminate the Adjustable Mortgage totally. The 5 years proposal the government announced will have the same problem later. Instead of just helping those hurt within the past 2 year; help them all. Adjust the rate back to original and give them a 2 point reduction in their rate so the victims of this failed loan can comfortably pay their new reduced mortgage payment. The families that were victims of losing their home as a result of the adjustable rate should be able to get their home back if it is not sold and get a reduced rate also. These families should be able to get their homes back at a reduced amount negotiated by both parties not to exceed 50% of market value. This would be better than HUD selling these homes for a dollar which was proposed this year. We must breathe new life into our neighborhoods. There should be a rehab loan attached to ensure a safe environment for families.
Another Solution is to create a grant to given to small businesses to reconstruct neighborhoods. Each neighborhood should have access to grocery stores or corner stores that are run by people that live in the neighborhood instead of the foreigner coming into neighborhoods and milking the people then taking the money to an upscale neighborhood. Most of the time these stores sale rotten food and products that tear the fiber of the people apart like cigarette, wine, lottery tickets, beer and other negative items. I know about supply and demand but we can take this opportunity to rebuild a positive neighborhood. It's time to get back to basics. Have loans for laundry mats, dry cleaners, restaurants, car shop, tire shops, and other small business to enhance the community.
