More than 6 million homes will be lost over the next 3 years. 8 million homes are estimated to be in default.

More than 11 million home owners (23% of total) are under water, i.e. the value of the home is less than the mortgage. These are prime candidates for strategic defaults. Homes have lost 30% of their values. Should strategic defaults happen; another 5-10% will be lost in home values. This will put more pressure on the vicious cycle, another 8 million homes where the equity is 5% or less.

50 million Americans cannot qualify for home loans because of their credit scores while the lenders increase the requirements of credit scores and a higher amount for down payment.

Are we talking about a Tsunami? Maybe. Next congress is likely to be a gridlock. Not much will be accomplished. Everybody is blaming the other guy for this mess. Forget the past. Forget the greed of wall-street billionaires that caused havoc. Forget the faults of regulators, brokers, lenders and everyone else. It is our collective failure. Global economic migration of the labor market has happened. Our prices are not competitive. Modern technology has turned the labor market into a global market. Any doubt? Post a job on elance.com and see yourself that you can invite global bidding even for a $100-job. When E&Y or Pricewater House sends your 1040 to Mumbai and pays $5 an hour and charges you $300 an hour, you know where the jobs are. Of course, there are countries like China that manipulate the currency to keep the prices low. In the past China advised us to lower our standard of living. The real question is “can we afford to buy cheaper foreign goods and services and still keep our standard of living high?” If you do not see the connection between cheaper goods and the job market, you are living in the rain forests of the Amazon.

The USA is continuously losing jobs since the last 50 years or so to Japan, Taiwan, Korea, China, Mexico and India. No politician addressed this issue in the last half century. We need to change our thinking. What we use or consume is also the basis of our livelihood. A paradigm shift is needed in how we live our lives.

And the members of United States Congress

After two years of treatment and several shots the patient (economy) is still struggling to get up and run. While you are thinking of alternative care for the patient, let me suggest that your cure was to treat the symptoms and not the cause. Our wounds are much deeper and our cares were superficial.  In order to understand the economy, we need to understand the very basic human nature. By nature we seek safety and security.

For fifty years or more, we were brain washed into thinking that a consumer driven economy is good. We invented credit cards to lure us to spend more and throw us into uncontrollable debt. We adopted this same path for government spending. We discouraged savings with fiscal policies. Look at China and India’s saving rates. Would you feel secure having more debt or having money in the bank?

We Americans adopted life styles beyond our means. We were sold on having TV’s in every room, garages with three cars and expensive vacations. When we could not afford them, easy financing was available. This went on in every part of our daily lives. We had to have different clothes and shoes for every activity, occasion and what not. Celebrities perpetuated myths of glamorous life styles. Middle and lower economic classes were sucked in whether they could afford it or not. We were sold a wrong life style, incorrect beliefs and destructive habits.

When the foundation of my house is weak, I cannot cure it by redecorating the walls. That is what congress and each president (including you Mr. President) has done. Each successive recession became  harsher and harsher. The path to long-term recovery lays in the micro element of the economy i.e. each individual human being. Instead of providing education and skills to all poor students, we spent a trillion dollars on a make believe war in Iraq, with no national interest served. We have housing that we cannot afford, we have a health care system that ruins us, and we have expensive education systems that do not encourage people to study. These are the result of past wrong doings. Every congressional law is modified and affected by the lobbyists whose narrow and divisive outlook ignores broader national interests.  Our elections are bought and sold by the moneyed interests. We, the people, remain spectators in this drama. We need to return to the very basics of life. Each individual is a micro unit of the national economy. Cure the micro unit and you will cure the national economy. It will take longer, perhaps beyond your presidency, but you will be remembered as the president who changed history.

Each individual must be properly educated, trained in skills he shows an aptitude for and be provided for earnings sufficient for a decent and respectable living.

• We must unlearn our ways of wasteful living.
• We must adopt fiscal policies to encourage saving
• Our domestic needs must get priority over foreign needs
• We must stop thinking of ourselves as world police. Reduce defense spending to .20 on the dollar collected. No nation is capable of attacking America. It is a defensive establishment that led us to believe in foreign threats.
• Our foreign policy and economic policy must co-relate and coordinate
• It is wrong to think that the size of our national debt is not an issue. 40 cents per dollar goes for the debt service. Think about this as putting back in the pockets of individuals and see how it makes a difference.
• We cannot run a debt trade policy. Look at what China is doing with their excess dollars. She is buying mines in Africa to control the future world economy
• Our constitutional fathers did not envision TV’s, cables and internet. Democracy must not be purchased by the money sources. Mag Whitman purchased the nomination with 80 million dollars and will rent governors mention with another few hundred millions. Is this the democracy that we are proud of? Unless we get rid of the money element from the elections, our national interest will take a back seat.

Nobody is more interested in fixing the economy than you. Fix the problems at the micro level and you have fixed the problem. Housing is turning out to be a crucial wheel in the present crisis. Let me suggest a most radical and out of the box approach. This is my crazy-insane solution for all American freedom forever.

The USA is paying $450 Billion dollar in interest payments. Next year it will be $525 Billion and then the following year will be $600 Billion dollars. Before you give us loan modification, please ask and get the loan modifications on all US obligations, especially from foreign powers that dumped cheap goods here and opened the main canal for them to suck in the dollars. With a savings of one trillion five hundred billion dollars, we can accomplish the following.

1. Pay off all US home mortgages over the next four years to 50% LTV. All mortgages will be solid. Banks will be liquid with no more toxic assets on their balance sheets.
2. US homeowners will be rock solid for their retirements. In exchange, Social security payments will be reduced. This is like raising the income of each household by almost $20-30,000 forever. In exchange, home owners will give you 2nd TD at 1% interest rate (which Banks offer you anyway.) You will be paid back when the property is sold or refinanced again. This will also stop additional borrowing on the property. Additionally homeowners will lose mortgage deductions.
3. Require US banks to waive interest on mortgages for four years in exchange for the 1/4^th principal payments or reduce the rate that they pay. (It is better than writing off 40% of the loan balance.)
4. Since Americans will be saving $250-300 billion dollars in interest, the savings will be circulated many times over in the  economy. As Fed and states collect 40% of all income as taxes, this will pay $350 billion that the USA will be investing with American Home Owners every year for the next four years.
5. Require all Banks to invest mortgage principal payments in small businesses and starts ups and not foreign securities. It will create more jobs and more income for the treasury.
6. American Credit card debt will be reduced. Require Banks to reduce the interest rate to 5%. It is a good return when Banks are getting money from Fed at 1% or less.
7. What do you do with all these 2^nd mortgages? You can securitize. With US backing, it can get triple “A” rating and get your money back in a year or so.
8. Homeless problem almost solved.
9. More kids will be in colleges.
10. What about people who do not own homes now? Give them 20 years tax credit of equal value if they buy home.

Most politicians’ and Nobel laureate economists will say this will never work. After all, they were wrong all the time. Give me one chance. With my plan, everybody gets what they want. You get your money back. Bankers are liquid and lending again. Americans are happily living in their homes forever. Credit cards are gone. The only difference with your plan and my plan-How do bankers get money. Hope to hear from you soon.

-APU-

P.S. – Visit me at www.divinereflections.org or www.foreclosureworkouts.info

The issue is we need to find the reason why 75% will fail. What preventive measures can we take? Where does the fault pan? How do we improve the results? Main street experience is that lenders are still unresponsive. It takes uniformity to get anything from the lenders. The staff is unlinked. We also need to separate incurable defaults. These are homes under the water containing strategic defaults or borrowers who have no incomes to support the mortgages. We need to turn them into renters as soon as possible with 2-3 years commitment do the inventory does not depress the housing market.

At this point it may also state that our entire system foreclosure process needs at least a fine tuning. The system works fine as long as the housing market is in an upward curve. However in down cycle, the system quickly exasperates the housing economy putting more pressure on regular re-sale market. Having our laws cast in concrete, we need a paradigm shift in thinking in all parties. For example:

1. Lenders need to consider social partners in crime effects
2. Borrowers need to evaluate their own responsibilities
3. Trustees duties and powers should be remained and perhaps widened
4. Third party roles such as mediators, brokers, and consulting agencies should be considered
5. Government responsibilities as guarantors
6. Foreclosure is not an issue between borrower and lender as its consequences are far reaching

Please consider my crazy-insane solution for all American Freedom forever.

USA is paying $ 450 Billion dollar in the interest payments. Next year it will $ 525 Billion and then following next year will be $600 Billion dollar. Before you give us loan modification, please ask and get the loan modifications on all US obligations, especially from the foreign powers that dumped the cheap goods here and opened the main canal for them to suck the dollars. With the saving of one trillion five hundred billion dollars, we can accomplish followings.

1. Pay off all US home mortgages over next four years to 50% LTV. All mortgages will be solid. Banks will be liquid and no more toxic assets on their balance sheets.
2. US Home owners will be rock solid for their retirements. In exchange, Social payments will be reduced. This is like raising income of each household for almost $ 20-30,000 forever. In exchange, home owners will give you 2nd TD at 1% interest rate (which Banks offer you anyway). You will be paid back when property is sold or refinanced again. Additionally home owners will loose mortgage deductions.
3. Require US bank to waive interest on mortgages for four years in exchange of 1/4th principal payments or reduce to the rate that they pay. (It is better than writing off 40% of loan balance).
4. Since Americans will be saving $ 250-300 billion dollars in interests, the savings will be circulated many times in economy. As Fed and states collect 40% of all income as the taxes, this will pay itself $ 350 billion that USA will be investing with American Home Owners every year for next four years.
5. Require all Banks to invest these mortgage principal payments in small businesses and starts ups and not in foreign securities. It will create more jobs, more income for the treasury.
6. American Credit card debt will be reduced. Require Banks to reduce the interest rate to 5%. It is a good return when Banks are getting money from Fed at 1% or less.
7. Home owners will have purchasing powers of $ 250 Billion dollars boosting unprecedented consumer spending every year.
8. What do you do with all these 2nd mortgages? You can securitize. With US backing, it can get triple”A” rating and get your money back in a year so
9. Homeless problem almost solved.
10. More Kids will be in colleges.
11. What about people who do not own home now? Give them 20 Years tax credit of equal value if they buy home.

Most politicians and Nobel laureate economists will say this will never work. After all, they were wrong all the time. Give me the chance one time. With my plan, everybody gets what they want. You get your money back. Bankers are liquid and lending again. Americans are happily living in their home forever. Credit cards are gone. Only difference with your plan and my plan- How do bankers get the money. Hope to hear from you soon.

PA

Note to my blogger friends- Hey if you like the idea send it to your friends.

These are the domestic concerns but let tell you how it plays internationally and on our future lives. Just one example. China has almost $ 700,000,000 in US Paper. She cannot spend the dollars enough and it keeps piling up. It is getting close to monopoly money. So she goes to African countries and gives out few billions in aid here and there and in turn gets mining rights on cobalt and other precious minerals. Africa has 60% of world supply of Cobalt. Cobalt is the essential material for all electronic equipments. Do you get the picture? Cobalt is not the only material.  Low cost or no cost loans to Poor nations of Africa are to be repaid in oil and other materials at bargain prices to keep the factories at home humming  for the low cost products to be exported to USA and diplomatic favors on the world stage. Vicious cycle continues.

There is nobody to blame but our collective failure to grasp the enormity of the effect of the global village. Our personal day to day decisions as to our buying habits, leadership failures and limited and short term approach caused this quagmire. I wish our leaders had addressed the balance of payments in trade for last 30 years? When you import more, you export the job. When you export the job, some one else owns the home. This is the simple economics that prevails in the end.

At this very point of time comes the foreclosure notice. Now the whole family is worried about the keeping roof over the head, making choices between roof and bread. If spouses are not intimately and psychologically connected, a stress also begins to develop in their marriage. Patience is in short supply. Anger is plenty. Ultimately children begin to feel the pain also. Family goes further down mentally.

If a divorce happens or person goes into deep depression, the mental damage is enormous. When we think of this loss to millions of people, we cannot even begin to evaluate the loss. I have seen people feeling suicidal syndrome or even committing the suicide.

Who is responsible for this? We cannot just blame the person going over board. The managers of our nation’s economy, lenders, brokers, appraisers and society as a whole contributed to this downfall. The accumulated damage to our social structure is enormous. Is any mental stimulus available from President Obama or President Bush or from Investment bankers?

Legal foreclosure is a way the bank or any other creditors can get back their money. If you fail to respond to the legal notice, the bank or other creditors have all the right to give advertisements in the print media and conduct an auction to sell the collateral to recover their money. Do you know what this means? This means that you lose the home that you worked so hard to buy. Do not ever let this happen to you! You can save your home from foreclosure by keeping your mortgage payments high on your priority list. In case you have trouble making payments, save your home from foreclosure by getting credit counseling or going ahead for a debit management program. You can get more information about these from your lender.

Protection from foreclosure can save you from a lot of trouble. You can save your home or any other collateral by being aware about how to get the right protection from foreclosure. There is nothing wrong in taking a loan; however, keeping yourself aware about what can go wrong in case you are not able to make the mortgage payments is a must! This will help your family and you keep away from a lot of troubles.

· Keep your mortgage payments high on priority. Do not ever delay the mortgage payments. Make sure you pay these mortgage payments before paying your credit card bills or any other unsecured debts. Even if you fail to pay the other bills, at the most you can be charged late fees or have an impact on your credit history; however, you will certainly not lose your collateral. This is one good way to ensure protection from foreclosure.

· There are several programs that can benefit you in case you have trouble making the mortgage payments. The credit counseling and debt management programs are offered by lending institutions as well as other agencies to help the debtor save his/her collateral. You can benefit from these programs whenever you encounter trouble in making mortgage payments and can save your home from foreclosure.

· Keep your lending institution in complete faith. In case you cannot make the mortgage payments, do not wait for a letter or legal notice. Let the lending institution know about this immediately! In most cases, the lending institutions are willing to work out a way, if you provide them with bank statements and other relevant documents that explain your current financial condition. This will help you gain protection from foreclosure.

· If you are going through an acute financial crisis, you can even ask for your loan to be restructured. With restructuring, the loan term can be extended and/or the interest rate on the loan can be reduced. This can prove to be a great help to you and can help you save your home from foreclosure.

These are just a few of the ways by which you can avoid foreclosure. However, adhering to these can save you from a lot of trouble!