Summary
Now is the time for creative innovation within the public and private sectors. It behooves the related industries of home construction,mortgage,and banking to uncover strategies that put in play will allow distressed homeowners to cut their payments and,at the same time, cut lender losses that increase substantially when foreclosure actions are initiated. Consider fractional ownership.
Analysis
The concept is an old-fashioned quid-pro-quo type of transaction that could work wonders for banks and homeowners. The fractional ownership strategy works by allowing distressed homeowners to convert part of their loans into equity; thereby, cutting their loan amounts and monthly payments significantly. In turn, banks get to keep homeowners in their properties, while also avoiding the expenses that inevitably come with foreclosure or with having to sell a home in a lackluster real estate market at a reduced price. Utilizing this philosophy, banks decide not to take the write-downs now, but rather to wait and deal with the properties at a time when they'll be selling them at a better price.
The lenders will actually take a partial ownership stake of the property, allow the borrower to get back into a timely payment, and then ride the market back up again to a future,possibly 3-5 years away, when the market in that area is back and they can refinance that borrower out, let the borrower buy them out, or they can dispose of the property through a sale.
Again,we must tap all our innovation to restore hope for homeowners and stability to the lending industry which continues to help deliver the American Dream.
