John Preston

Is Paulson's TARP a TRAP?

Let me simply my proposal by outlining a plan to address the current housing and mortgage crisis is not properly defining the problem-solution-benef...
THE PROBLEM: Is not super low rates, is not toxic loans, is not bad underwriting, is not stupid borrowers. That is in the past. The current problem is that Main Street, basically homeowners, cannot financially function. My experience is that approximately 90% of the homeowners(those I have spoken with) who are in trouble are making significantly less income than they were 2 or 3 years ago. They cannot spend money because for many…their income has declined by 25-50%. We have an income problem at the bottom of the financial ladder…merely injecting money at the top of the ladder is not sufficient.
THE SOLUTION 1: My “Plan” is centered on a GPM or GEM concept…that is a graduating payment, fixed rate mortgage…or a growing equity mortgage. These loans offer initial, scheduled payment relief for homeowners. The payment reductions should be sufficient to allow homeowners to make scheduled debt payments and provide for their families. ALL homeowners with mortgage debt would be eligible. This would be accomplished by “modification”. No debt is reduced. We are simply buying time to stabilize housing, and to encourage consumers to spend. This also puts the burden for execution on the companies who created the problem.
THE SOLUTION 2: With the Paulson Plan, I would like to see limited injection of capital into the financial system. We need to allow SOLUTION 1 to be completed and then review the status of the financial market place to see if more work is needed.
THE BENEFITS: My plan directly addresses Main Street, both the housing issue and the general economy. I believe that by injecting immediate relief on the ground level, as described above, that housing will find firm value, that consumers will begin to support their local merchants, that community banks will begin to work with their clients, and that, as the mortgage asset portions of institutional balanced sheets are simplified (only one loan program), clarified (all who need or want help will have the NRP loan, they’ll all be in one basket), and liquefied (the resulting basket of assets should be far easier to work with).
SUMMARY: This plan will work to relieve financial pressures on all homeowners, stabilize housing and create positive energy in the economy. My plan works from the “bottom up”…trickle up, so to speak. There would be less financial exposure to the taxpayer, and less initial support to Wall Street and Corporate America.
This “one size fits all” approach is necessary to simplify the management of this new class of mortgages. The end result would be to re-inflate the value of homes and mortgage assets.
Once housing is stabilized with my plan, then the "new mortgages" can be dealt with by and between the various lenders, and Treasury and the FED, in a manner as they outline. This would put the front end of the solution directly into Main Street, and require the lenders, many of whom are at the root of the problem, to make the first investment in correcting the mortgage mess.
John Preston
[e-mail] / 928-273-2248

Is Paulson's TARP a TRAP?

I have developed a plan to repair housing in America, which includes the NATIONAL REFINANCE PROGRAM. It is not a true “refinance”, but rather a stylized modification. This plan will work to relieve financial pressures on all homeowners, stabilize housing and create positive energy in the economy. My plan works from the “bottom up”…trickle up, so to speak. There would be less financial exposure to the taxpayer, and less initial support to Wall Street and Corporate America.
My plan involves asking all American homeowners with mortgage debt if they would like a different mortgage plan. If they say yes, then their lender would convert their existing mortgage to a new plan. This “one size fits all” approach is necessary to simplify the management of this new class of mortgages. The end result would be to re-inflate the value of homes and mortgage assets.
Once housing is stabilized with my plan, then the "new mortgages" can be dealt with by and between the various lenders, and Treasury and the FED, in a manner as they outline. This would put the front end of the solution directly into Main Street, and require the lenders, many of whom are at the root of the problem, to make the first investment in correcting the mortgage mess.