- Jun 6, 2007
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Public comments about what the Democrats would do in responding to the Covid 19 crisis if they had full control in Washington is scary in so far as the price tag of their agenda. If Democrats are smart, no if they don't want to act like a bunch of idiots, they will show restraint they will stay on the path of being fiscally responsible with their policy agenda. Because if they just want to go on a spending spree and indulge their spending wish list independents are going to say to them come November forget you we are not voting for you so you can wreck our country's finances worst then they are and move us closer to the edge of economic collapse that our corrupt government over the past thirty-five years has moved us toward. Democrats should really take a pause because independents are not going to jump from the pot into the fire, Trump and the many right wing Republicans in Congress have really screwed things up and wasted opportunities for America but us independents know things can get much worse and we're not going to give the keys of power in the Country to agents of disaster!
In the next CARES Act Congress and the President should better address the mortgage problem brought about by the corona-virus crisis. It was a very good short-term response to the economic crisis that in CARES ACT One the Federal government allowed people to defer paying their mortgage for up to a year. But there is many problems brought about by this, the country is seeing mortgage servicers telling home borrowers yes you can defer but at the end of the deferral period a big balloon payment of all your deferred monthly mortgage payments will be due as opposed to just extending the loan so that the missed payments are paid on the back end of the loan; also, the Federal government with this provision has left mortgage servicers in the terrible position of having to pay the bond holders of the bonds tied to these mortgages the missed mortgage payments which is causing them severe financial hardship. The merits of the issues and fairness seem to call for the following conclusions. Financial experts are telling us that a significant number of businesses are not going to survive this crisis so their employees will lose their jobs and some employees of surviving companies will earn less because their companies earn less.
The harsh reality of this development is that some of these affected employees will no longer be able to afford their homes so why doesn't the Federal Government facilitate them getting out which would help not only the borrowers but also the mortgage industry and mortgage bond holders and maintain stability in home prices. The Federal Government could facilitate this by for the next three years making non-taxable any home loan debt forgiven by a lender on a short sale; a short sale is a sale of a home for an amount less than the amount of the principal owed on the home loan and what the lender does is forgives the difference meaning the borrower is not obligated to pay the difference. Why would lenders and mortgage servicers want to do this and begin this process immediately because they do better economically in the long run from a short sale compared to pursuing the foreclosure process and the Great Recession taught them this clearly; moreover, America has lucked out that home prices have held steady with this crisis the mortgage and real estate industries don't want to get to April 1 of 2021 when the CARES ACT's mortgage deferrals will likely end and realize that there is a title wave of borrowers that cannot afford their mortgages and will be going into foreclosure because if that occurs that will likely cause home prices to significantly drop which would lead to a significant number of homeowners being underwater who then often say I am walking away from my mortgage because it doesn't make economic sense for me to keep paying my mortgage when I am not gaining equity in my home from such payments which leads to a downward spiral for these industries which can become contagious throughout the economy causing devastating damage. Further, what the Federal Government should do to facilitate these sales is expand the capital gain exclusion for home sales for taxpayers that have lost their job or dramatically lost their income due to this crisis, currently the exclusion for capital gains from primary home sales is 250 K for an individual and 500k for a couple that is this amount of capital gains from the home sale you do not have to pay taxes on if you owned and lived in the house for the past two years; the Federal government should double this exclusion for home sales from these sellers from now thru the end of 2022 and wave the two year requirement. One might initially say this is way too generous but it isn't for the abundance of taxpayers that are older who have lived in their home for twenty to thirty or more years whose home is largely their nest egg for retirement and for these older workers who because of their age cannot get replacement work they are going to need the income from this sale to carry them to the end of their life. To be eligible for this expanded exclusion the taxpayer would have to be under a certain taxable income threshold for this year and the following two years (it can be done thru one line on the 1040 and one form for those that take the exclusion), to exclude the rich from getting this break, and have had to experience a reduction in their earned income of at least twenty five percent from their 2019 income for this year and the following two years with the 2019 figure adjusted for inflation, so as to insure only victims of this corona-virus crisis are getting this break.
Another side of this problem is that current situation is essentially giving a mortgage holiday for a year to borrowers taking advantage of this provision in the CARES Act. This is not exactly what the Federal Government should be doing the government should be fair to the lenders and bond holders. Many of these affected borrowers will begin working again in May, June and July although their incomes may be down because of the economy's slow return to normal; nevertheless, they will be able pay a portion of their monthly mortgage. Why doesn't the Federal government revisit this forbearance policy and add the following provisions, the borrower is still obligated to pay twenty-three percent of their taxable income for the year 2020 (an affordable amount) to their lender as a mortgage payment. Of course no one will know exactly what that figure is until the borrower does his or her taxes for the year but the borrower knows what income is coming into the borrower on a monthly basis and at the end of the month the borrower should just pay twenty-three percent of that figure. Actually, for administrative purposes the Federal Government should just extend the forbearance until the end June two-thousand twenty-one which would allow the borrower and lender to see the taxpayers 2020 tax forms by April 15 and so they will know definitely what the twenty-three percent figure is and know what the borrower should have been paying during the months of March thru December or April thru December depending on when the last full payment was due in 2020. The Federa government should then mandate that this affordable monthly payment figure be used for the first six months of 2021 so that by the end of June 2021 the borrower will be obligated to have paid that affordable amount if the borrower hasn't he or she is faced with a balloon payment for that amount and the balance of principle and interest that the lender underwent forebearance on is added to the back end of the loan. Congress and the President should extend this forebearance policy on mortgage loans to all home loans not just Federally backed loans because otherwise this whole issue is going to tie up the courts good lawyers for borrowers who don't get this forbearance right are going to be pursuing injunctions against sherriff's offices which execute foreclosures arguing they were discriminated against as well as debtors in Bankruptcy court. Lastly the Federal government should free the mortgage servicers from having to pay mortgage bond holders and seller of credit default swaps from having to pay holders of such swaps on fairness grounds if it cannot be done on a legal basis like thru force majeure where by law a force majeure provision is added to every connected contract have the Treasury or Federal Reserve Bank just pay the mortgage servicers the deferred mortgage payments and when the servicers get the missed payments from the borrower just return it to the Treasury or Fed..
In the next CARES Act Congress and the President should better address the mortgage problem brought about by the corona-virus crisis. It was a very good short-term response to the economic crisis that in CARES ACT One the Federal government allowed people to defer paying their mortgage for up to a year. But there is many problems brought about by this, the country is seeing mortgage servicers telling home borrowers yes you can defer but at the end of the deferral period a big balloon payment of all your deferred monthly mortgage payments will be due as opposed to just extending the loan so that the missed payments are paid on the back end of the loan; also, the Federal government with this provision has left mortgage servicers in the terrible position of having to pay the bond holders of the bonds tied to these mortgages the missed mortgage payments which is causing them severe financial hardship. The merits of the issues and fairness seem to call for the following conclusions. Financial experts are telling us that a significant number of businesses are not going to survive this crisis so their employees will lose their jobs and some employees of surviving companies will earn less because their companies earn less.
The harsh reality of this development is that some of these affected employees will no longer be able to afford their homes so why doesn't the Federal Government facilitate them getting out which would help not only the borrowers but also the mortgage industry and mortgage bond holders and maintain stability in home prices. The Federal Government could facilitate this by for the next three years making non-taxable any home loan debt forgiven by a lender on a short sale; a short sale is a sale of a home for an amount less than the amount of the principal owed on the home loan and what the lender does is forgives the difference meaning the borrower is not obligated to pay the difference. Why would lenders and mortgage servicers want to do this and begin this process immediately because they do better economically in the long run from a short sale compared to pursuing the foreclosure process and the Great Recession taught them this clearly; moreover, America has lucked out that home prices have held steady with this crisis the mortgage and real estate industries don't want to get to April 1 of 2021 when the CARES ACT's mortgage deferrals will likely end and realize that there is a title wave of borrowers that cannot afford their mortgages and will be going into foreclosure because if that occurs that will likely cause home prices to significantly drop which would lead to a significant number of homeowners being underwater who then often say I am walking away from my mortgage because it doesn't make economic sense for me to keep paying my mortgage when I am not gaining equity in my home from such payments which leads to a downward spiral for these industries which can become contagious throughout the economy causing devastating damage. Further, what the Federal Government should do to facilitate these sales is expand the capital gain exclusion for home sales for taxpayers that have lost their job or dramatically lost their income due to this crisis, currently the exclusion for capital gains from primary home sales is 250 K for an individual and 500k for a couple that is this amount of capital gains from the home sale you do not have to pay taxes on if you owned and lived in the house for the past two years; the Federal government should double this exclusion for home sales from these sellers from now thru the end of 2022 and wave the two year requirement. One might initially say this is way too generous but it isn't for the abundance of taxpayers that are older who have lived in their home for twenty to thirty or more years whose home is largely their nest egg for retirement and for these older workers who because of their age cannot get replacement work they are going to need the income from this sale to carry them to the end of their life. To be eligible for this expanded exclusion the taxpayer would have to be under a certain taxable income threshold for this year and the following two years (it can be done thru one line on the 1040 and one form for those that take the exclusion), to exclude the rich from getting this break, and have had to experience a reduction in their earned income of at least twenty five percent from their 2019 income for this year and the following two years with the 2019 figure adjusted for inflation, so as to insure only victims of this corona-virus crisis are getting this break.
Another side of this problem is that current situation is essentially giving a mortgage holiday for a year to borrowers taking advantage of this provision in the CARES Act. This is not exactly what the Federal Government should be doing the government should be fair to the lenders and bond holders. Many of these affected borrowers will begin working again in May, June and July although their incomes may be down because of the economy's slow return to normal; nevertheless, they will be able pay a portion of their monthly mortgage. Why doesn't the Federal government revisit this forbearance policy and add the following provisions, the borrower is still obligated to pay twenty-three percent of their taxable income for the year 2020 (an affordable amount) to their lender as a mortgage payment. Of course no one will know exactly what that figure is until the borrower does his or her taxes for the year but the borrower knows what income is coming into the borrower on a monthly basis and at the end of the month the borrower should just pay twenty-three percent of that figure. Actually, for administrative purposes the Federal Government should just extend the forbearance until the end June two-thousand twenty-one which would allow the borrower and lender to see the taxpayers 2020 tax forms by April 15 and so they will know definitely what the twenty-three percent figure is and know what the borrower should have been paying during the months of March thru December or April thru December depending on when the last full payment was due in 2020. The Federa government should then mandate that this affordable monthly payment figure be used for the first six months of 2021 so that by the end of June 2021 the borrower will be obligated to have paid that affordable amount if the borrower hasn't he or she is faced with a balloon payment for that amount and the balance of principle and interest that the lender underwent forebearance on is added to the back end of the loan. Congress and the President should extend this forebearance policy on mortgage loans to all home loans not just Federally backed loans because otherwise this whole issue is going to tie up the courts good lawyers for borrowers who don't get this forbearance right are going to be pursuing injunctions against sherriff's offices which execute foreclosures arguing they were discriminated against as well as debtors in Bankruptcy court. Lastly the Federal government should free the mortgage servicers from having to pay mortgage bond holders and seller of credit default swaps from having to pay holders of such swaps on fairness grounds if it cannot be done on a legal basis like thru force majeure where by law a force majeure provision is added to every connected contract have the Treasury or Federal Reserve Bank just pay the mortgage servicers the deferred mortgage payments and when the servicers get the missed payments from the borrower just return it to the Treasury or Fed..
