We have a flaw in our economic policies. This flaw continually helps to widens the wealth gap between the impoverished, and the riches 1% of our country. 

The flaw also eliminates competition between large, and small businesses by eliminating small businesses during down turns in our economy. This condition allows large businesses to control a larger and larger share of the market, giving them the resources to influence our political representatives. 

We are in a national economic slump caused by national policies! We must change national policies to resolve national problems. 

Main St., the middle class, the working class, small businesses, and people in general have been financially decimated by the current financial crisis. Their disposable income , and confidence have been decreased. 

This financial crisis has created one of the longest down turns in US economic history.

The vacant, and abandoned homes that are in our neighborhoods are similar to food that is rotting in the fields. We can do better than this for our citizens, when you consider that so many families need better housing. 

The buzz on the housing market is: Sell the foreclosed homes to investors. Rent the foreclosed homes to previous home owners and tenants. Sell the homes with underwater mortgages by short sale, to deal with the foreclosure crisis. 

Let me ask you, Do we really want a nation of investors, and renters? 

Short sales are OK, and renting is appropriate for some people, but we need to help the majority of people stay in their homes, if at all possible, to maintain the American Dream of home ownership.

Sure we screwed up this time, but wise people learn from their mistakes, and make the necessary corrections to stop repeating the same mistake we have been repeating for the last 100 years. 

Lately there has been talk about a national refinance plan that would help heal the primary home market. 

Federal Reserve Chairman, Ben Bernanke, and Elizabeth Duke have made speeches in favor of the government doing more to stabilize the housing market. President Obama mentioned a national refinance plan in his 2012 State Of The Union speech. 

The private financial sector needs to step-up, and help resolve the foreclosure, and unemployment crisis they helped create. 

We need to go beyond just a refinance plan. The economy needs a principal reduction plan to quicken recovery. We cannot wait 30 years until all the underwater mortgages are paid off, the homes are foreclosed, or abandoned. 

Every qualified homeowner with an underwater mortgage must be included in the national refinance plan, and the principal reduction policy. Which is approximately 25% of current homeowners.

The economy needs a principal reduction plan to unload the burden that the Big banks, Wall ST. and the government helped create to increase their profits, and tax revenues. 

Homeowners are not innocent, but the working, and middle class should not be the only ones suffering to clean up the mess the “BIG BOYS” MADE. 

The Committee For Economic Reform and A Better Economic Future has developed a PRIVATE SECTOR SOLUTION TO JOB CREATION AND ECONOMIC RECOVERY. 

WE CALL IT “THE PEOPLE’S ECONOMIC RECOVERY PLAN”. 

The Plan has basically two parts. Get the economy on a healthy path to recovery, and change the policies that helped create the financial crisis.

To help prevent another financial crisis from occurring, we need to stop relying on the Federal Reserve to slow the economy down, when it is getting out of balance, and the amount of money, and credit that is being created is growing too fast. Instead we need to use the income tax to control inflation psychology, and excessive hard capital asset appreciation. 

We believe that the financial sector, investors, and the people will embrace the “PLAN”, because it will help heal the economy, and the primary home market. Improving the primary home market will decrease the unemployment, and the foreclosure rate, without increasing the deficit, like a government jobs program, or another government stimulus program will do. 

We do not want to leave our children, our grand children, and our great grand children a legacy of debt to pay off with higher taxes, or an inflation tax, which will make us all poorer, create more poverty, and more government social liabilities. 

You are correct, if you believe the foreclosure crisis will not correct itself quickly, without direct action. There are three things we can change, to speed up recovery. 

1. Change the bankruptcy law. 2. Increase aggregate demand, without increasing the deficit. 3. Change the guiding policies (income tax policies) of our enterprise economy. 

Let’s get started with changing the unconstitutional bankruptcy law that violates the “equal protection under the law” clause of the Fourteenth Amendment, Section one of our Constitution. 

People should have the same rights as businesses to have their mortgage terms, and unpaid balances modified by a bankruptcy judge. Businesses are not better than People. Businesses, and Corporations are not People! 

This video of a speech Reps. Rep. Earl Blumenauer of Oregon made in front of Congress, explains why we need to change the bankruptcy laws. In fact Rep. Earl Blumenauer of Oregon would like the Occupy groups, and Tea Party members to support the needed changes to the bankruptcy code. http://www.youtube.com/watch?v=J7YPR_p7DYQ/ 

Change only comes about when you have a “Plan” which benefits all parties that are involved. The individual person can see how it will help their situation, and they are willing to stand up for themselves, and unite with others to be heard. 

We need to convince the financial sector that it is to their benefit to make changes to their mortgage terms, and the bankruptcy laws to prevent more foreclosures, and improve the economy. Banks are only as financially strong as their customers. Their customer can be a government, or a homeowner.

Greece, and the other PIGS countries are a perfect example of this. Their government debt problems can crash the world’s banking system if their government debt, and their citizens debt obligation are not restructured as soon as possible. To have a healthy economy both forms of debt must be restructured at the same time. Governments cannot pay their debt unless the national economy is good. The national economy cannot be good unless the export market, and the consumers’ financial condition are in good condition. 

I agree with Reps Blumenauer, changing the bankruptcy laws would be a good constitutional cause, that the Occupy and Tea Party groups should support. Both groups support our Constitution, and want the economy to improve. They both want to protect our rights, and our freedom. 

Changing the bankruptcy law would empower homeowners to be able to modify their mortgages, in court. With the availability of the bankruptcy court option, it would increase the home owner’s ability to have their mortgages restructured when dealing with the banks, if the financial sector failed to accept responsibility for what they helped do to our economy, and to millions of people’s lives.

Reducing principal balances would be a way to help the economy to re-balance itself, and for the financial sector to pay for the damage it did to our economy. 

The 26 billion settlement, arranged by the State’s Attorney Generals with the biggest banks, is only tiny portion of what is needed to repair the damage that has been done by the banks and financial sector. The “Plan” is different. It includes all current home owners and new home buyers. Those families that have lost their homes illegally should receive a direct payment for damages. 

Who knows, the way the economy is going, you may wish that you had helped correct this unconstitutional bias law, to restructure your debts, to save your home from foreclosure. 

Another thing we need to consider changing is our single family home rental policy. The market for single unit housing should be made by primary home buyers. Investor in the single unit primary home market is a destabilizing factor in the primary home market. Investors have no connection to a home like a homeowners do. During the Great recession investors have abandoned tens of thousands of homes creating blight in our neighborhoods. As investors move in and out of the primary home market they create large swings in the price of homes as in commodity prices. Investors have many opportunities to invest in multi-unit housing . The deduct-ability of expenses for single unit rental housing should be eliminated. This change in our housing policy would increase our multi family housing stock, and maintain affordability in the primary single family home market. It would increase home ownership in our country.The repair deduction that investors currently have should be allowed by homeowners to encourage people to maintain their homes. This change would increase economic activity, employment and prevent neighborhoods from deteriorating. 

WE ALSO NEED TO INCREASE TOTAL DEMAND IN OUR ECONOMY, WITHOUT INCREASING THE DEFICIT. 

In a recent poll released by CNN, of the businesses contacted, over 60% of them said that it wasn’t taxes, or regulations that was holding them back from expanding their businesses, it was a lack of demand for their service, or products. 

The way you increase aggregate demand in an economy is by increasing people’s disposable income, with employment, tax decreases or an interest rate reduction.

Raising, or lowering taxes is not a good idea, to my way of thinking. The “Plan” does not increase the deficit, or affect the Social Security fund. 

How the “Plan” increases people’s disposable income is by making available, to all qualified homeowners, and home buyers, a mortgage with new terms. Terms that they can succeed at, unlike the previous mortgages that created the collapse of our economy. 

The new mortgage terms would be similar to other mortgages that are available to home owners. It starts out at a low interest rate, but, and this is important, the Ascending Interest Rate Mortgage is not indexed after a few years. like the current 5/1 Adjustable Rate Mortgage is. 

The Ascending Interest Rate Mortgage has a starting interest rate of around 3% or lower, based on the ten-year US Treasury Note. Currently the 10 year Treasury Note is lower than 2%. That would make the interest rate for the first year lower than 2.75%. The interest rate would increase .25% per year. The interest rate would stop increasing at 5%, or at the 30 year fixed rate interest rate, whichever is lower at the time the mortgage is originated. 

The down payment on new mortgages would be 10%. A lower down payment would require mortgage insurance, or mortgage payment insurance. Mortgage payment insurance would be the better choice, because the mortgage payments would continue to be paid if something happened to the homeowner that made it impossible for them to make their monthly mortgage payment. The home does not need to be foreclosed, for the bank, or investor to receive their money back, as with mortgage insurance, that you pay to protect the bank, or investor from a loss, if you default on your mortgage. 

A person wanting to make a new purchase of a home, or refinance an existing mortgage, that is not current with its payments, would have to qualify at a 5% interest rate, or the current 30 year fixed interest rate mortgage rate, with a 3%, or lower starting interest rate, so we reduce the chance of new defaults.

A homeowner who has kept their mortgage payments current, even if their mortgage is underwater, would be sent a letter, which would change the terms of their mortgage without having to qualify at the 5% interest rate or 30 thirty year fixed interest rate mortgage rate. Nor would they need to have their home appraised. 

When homeowners refinance, or restructure their mortgage from a 6% mortgage interest rate to a 3% mortgage interest rate, their disposable income is increased. If their interest payment each month is $1500.00 at the 6% interest rate, after their mortgage interest rate is reduced to 3% their interest payment drops to $750.00. Their monthly disposable income is increased by $750.00. If you multiply the $750.00 by millions of households, you increase aggregate demand on Main St. by hundreds of times. 

What will homeowners do with the increase in their disposable income they receive? The homeowners will spend it on their families. 

What could you do with an extra $750.00 dollar of extra money each month? If you don’t have a mortgage, don’t worry. When the homeowners spend the money, it will go out into the economy, just like a tax cut would. Be ready to earn your share. There is no way Congress can give the working, and middle class a $750.00 per month tax cut, or anywhere close. 

The “Plan” increases productive growth, and consumption, which will increase employment in our economy. This will reduce our governments social liabilities, and increase tax revenues.

Are you concerned that investors will be losing purchasing power because of the refinancing of the mortgages at a lower interest rate. It is no different from when interest rates where decreasing in the 1980s from 21% to 7%. People, and families were refinancing their mortgages then, as they need to do now. Nobody was concerned that the investor was losing purchasing power. We called it prosperity, and growth. 

Investors invest their cash buying up all the homes that families have lost through foreclosure. Or, maybe they will be in the commodities market bidding up the price of food, energy, and the materials for production with their extra money. 

Fannie Mae and Freddie Mac would need to start offering to purchase the new mortgage from mortgage brokers, and the banks. This is the only way the new mortgage will be made available to the public. 

The Occupy groups should demonstrate in front of Fannie Mae and Freddie Mac The Occupy Wall St. groups need to put pressure on them to change their policy of no principal reduction, and to change their mortgage terms. These changes will help the economy improve, and reduce foreclosures by stabilizing the primary home market, and increasing employment. 

If Fannie and Freddie Mac do not agree to offering to purchase the new mortgage, and lower principal balances, then we should pressure President Obama, and Congress to foreclose on the over 160 billion they owe the taxpayers. We would then be able to offer to purchase the new mortgage to improve the economy. Purchasing the new mortgage, or lowering principal balances should not cost the taxpayers a dime. 

LEARN HOW FREDDIE MAC HAS BEEN BETTING AGAINST STRUGGLING HOMEOWNERS

http://www.npr.org/2012/01/30/145995636/freddie-mac-betting-against-struggling-h…/

Fannie Mae and Freddie Mac have no problem securitizing the 5/1 ARMs, and selling them to investors. With the tax code changes I will be talking about later, to stabilize long term interest rates, the Ascending Interest Rate Mortgage would be no different to the financial markets than if all at once all homeowners wanted to purchase, or refinance their home with an ARM, that started out at a low interest rate. In fact they would like the new mortgage more, because, unlike an ARM, or a US Treasury Note, the interest rate increases .25% a year, until it reaches the 30 year fixed interest rate mortgage rate. 

The home buyer, or the homeowner will like the new mortgage terms, because they will know what their housing cost will be for years to come. With predictability comes confidence in taking on the responsibly of a mortgage. 

To solve the underwater mortgage problem, underwater mortgages should be reduced an additional 33% of the current monthly principal, and interest payment each month until the value of the home equals the unpaid balance of the mortgage, or up to 10 years whichever occurs first. Taxpayers should not be made responsible for any reduction in principle balances. The financial sector should take full responsibility for the cost of principal reduction, because of all the illegal things they did before, and after the financial crisis. Also for the damage they did to people’s lives. 

By lowering the unpaid principal balance monthly, instead of all at once, the home owner has hope that sooner than later their mortgage will equal the selling price of the home. They will not add the home to the foreclosure inventory. 

The financial sector will like the Ascending Interest Rate Mortgage, and monthly principal reduction policy, because the loan will remain a performing mortgage asset, and will maintain it’s highest possible book value. 

Both the lender, and the homeowner will give up a little for economic recovery. The borrower has lower payments on a faster declining mortgage balance. The bank, and investor are receiving mortgage payments on a larger mortgage than if they foreclosed on the home, and sold it in a depressed housing market.

When demand for homes increases, and prices are increasing, 1 to 2 percent a year, and with the unpaid balance of the mortgage decreasing 1 or 2 percent a year, the unpaid balance of the mortgage, and the value of the home will meet somewhere in the middle of the two factors.

The financial sector will save billions of dollars in foreclosure cost, and legal fees, they would otherwise be paying for investor law suites, mortgage buy backs from the GSEs, and government housing agencies, and homeowner law suites. Not to forget all the money that it cost to foreclose on a home, and the money lost selling the home in a depressed real estate market. 

We should start offering these terms to primary home buyers who want to buy a foreclosed home, to eliminate the foreclosure inventory. We should make the new mortgage available to all conforming priced homes after the maximum amount of the mortgage the government will guarantee is lowered. These terms would only be available to owner occupied single family homes. 

We cannot wait 30 years until all the underwater mortgages are paid off, foreclosed, or the homes are abandoned. We need an economic recovery NOW,…NOT LATER!! Each day that passes, kicks thousands of families with their children, to the curb. 

To increase aggregate demand in an economy you can also increase employment opportunities. Many of our jobs have been outsourced to other countries that have lower wages, less worker protection regulations, and environmental protection laws. President Obama wants to create a level playing field, more job opportunities, and make sure everyone is paying for the cost of providing the needed infrastructure for companies, and people to succeed. He also wants to eliminate the tax benefits for companies that move their businesses to other countries.

We must do more than eliminate the tax benefits to create a level field for production cost. To accomplish these goals the importing companies must help create that level playing field. If an company uses a country which pays less wages, does not have the same worker protection laws, or environmental protection regulations, the importing company should pay the differential in the cost of production between the two countries. This fee should not be retained by the importing country. The fee should be sent back to the exporting country, and then distributed to the workers, and environmental protection agencies of the exporting country to create a level field of production cost. Or, if there is a trade deficit it could be applied to reduce the debt between the two countries.

The other thing we must ask ourselves is: Why do we have these recurring cycles of deep recessions, higher prices, and economic bubbles about every eight to ten years?  Reducing interest rate increase risk. 

If you go back, and examine our recent economic history, you will find that since 1952 our economy has experienced a recession about every 8 to 10 years. Some times we experience a recession in a shorter period of time, like when the “dot com” bubble imploded. 

Eight to ten years is how long it takes for our economy to become over leveraged with credit obligations before the Federal Reserve “takes away the punch bowl” as they say. 

When the Fed tightens the control of credit, the resulting higher interest rates causes our economy to return to the recession cycle. It also devalues current debt by the precentage of increase in interest rates. If a person, or company has invested in a mortgage, or any debt with a fixed interest rate term, and say a 3.87% interest rate, which a majority of homeowners prefer, and the the Fed causes interest rates to rise 1%, the mortgage resale value can decrease by as much as 25%. This fact can create a crisis in the mortgage financial sector, similar to the crisis that destroyed the savings and loan companies of our financial sector. The Ascending Interest Rate Mortgage solves the higher interest problem we will be experiencing in the near future, and the income tax change that I will be discussing shortly will help prevent the risk of interest rate increases. 

The financial crisis, and the resulting Great Recession was caused by over-leveraging credit in our economy; be it derivatives, or home mortgages. They are both leveraged purchases, because they both control a large amount of monetary liability with a small amount of money. 

The financial sector does not know when to stop, nor does it want to stop, creating the product (credit) they produce. They will continue to make loans, creating money, as long as people are willing to walk thru their doors, or get on a computer, and are willing, and able to take out a loan, or use a credit card. 

When a factory produces too much product it becomes unprofitable to produce more product. When the financial sector creates to much of their product, it becomes more profitable. Too much credit creation causes prices to rise, and hard capital assets to appreciate. Therefor larger, and larger loans can be made, and larger fees, and more interest can be collected. 

Relying on the Fed to control credit formation, and inflation expectations with higher interest rate policies is a flaw in our economic policies. By relying on the Fed to control inflation expectations, we keep repeating economic history every time there is a recession, or the Fed does nothing with a credit bubble, and the credit bubble bust, like the primary housing bubble, which creates a very deep recession. 

Free markets are not perfect, as many people claim, especially financial markets. Financial markets have all types of people, and loads of money in them. The two things that are necessary to make a market, but both of them can corrupt a market. 

The financial sector created the financial crisis, even when they knew better. They had Congress change laws, and deregulate the financial sector, all in the name of free market theory, before they could put their plan into action, so they could maximize their profits, and not be charged with a crime.

Economic bubbles, and high inflation are caused by the excessive use of credit in our economy. The economy becomes unbalance by to much demand (credit), which is money, being created in the economy, insufficient competition, or not enough goods, and services are being produced by the economy. 

The question is, What is the best way to re-balance the economy, higher interest rates used by the Federal Reserve , or the income tax?  

My vote goes to the income tax. 

The Zero Inflation Taxation Policy will make our economy more productive, and more efficient in preventing poverty. It will help lower the amount of taxes needed to support social programs. It maintains demand more closely to the production capabilities of our economy, and maintains normal consumption demand during the economic cycles of inflation, and recessions. 

Instead of waiting for the Federal Reserve , the US government, or State governments guessing how to balance the economy with higher, or lower interest rates, changes in the tax code, or other policies, which are all monetarily, or politically motivated, the economy itself would automatically self balance, and tell us, the people, when it needs more money (demand) in the economy, or less demand (money) in the economy. 

The Fed has enormous power over our enterprise economic system. It controls the means of exchange of our economy. By tightening the money supply, it can kill an economy, or if it is too lose with its money controls, it can cause havoc in our economy. 

By using the income tax to control inflation, and inflation expectation, the people regain control of their economy again. The Policy prevents the necessity of the Fed to raise, or lower interest rates, which is very old tech, and very destructive to small businesses, the working, and middle class people of our economy. 

If the economy had excessive demand occurring, the excessive demand would be reduced from the top of the economic ladder with the income tax. Currently demand is reduced from the bottom of the economic ladder, with higher interest rates, when inflation is occurring, which increases the cost of the medium of exchange, which the enterprise system needs to function. 

Higher interest rates increase unemployment, and bankruptcy in the small business community, and in people’s lives. When small businesses go bankrupt this allows big businesses to get bigger, and gain more control over our economy, and our political representatives. 

With excessive demand reduced from the top of the economic ladder, by the income tax, normal production and consumption can continue without raising cost, and the price structure of our economy. Higher interest rates in turn reduces the competitiveness of our products in the world markets by increasing cost, which causes prices to increase. 

Higher interest rates increase poverty, government interest cost, and social liabilities. which increases our taxes, as more people become government dependent because of the increase in the unemployment and bankruptcy rate caused by the higher interest rates. 

The Zero Inflation Taxation Policy would work like this. During a recession, or normal economic times, the income tax code would remain as it currently is. Except to lower the rates as our economy became more efficient, and more people are included in the private sector of the economy. If inflation started to occur, based on a true consumer price index, that included a more complete basket of goods and services, the interest deduction would be reduced based on the inflation rate. At the same time the inflation rate. This policy would pertain to all businesses, and people, just like higher interest rates do. As inflation subdued, the percentages would change back to 0%. This would maintain the balance of the economy, without creating a recession as higher interest rate policies do when used by the Federal Reserve. 

People at the end of the year would correct the balance of the economy by paying a little less tax, or a little more tax based on the how the economy was operating and how their money was invested.

The balance of values between money, and hard capital assets would remain in closer balance each year instead of having a recession to re-balance the values every 8 to 10 years, as we are going through now, with the Great Recession of 2008. 

Using the income tax to control inflation, and inflation expectations will help raise the standard of living of all our citizens, decreasing poverty, and closing the wealth gap, by allowing people at the bottom of the economy to maintain the little piece of pie they have worked so hard to obtain.

In real estate you may have heard the saying, “Location, Location, Location!” In macro economics the saying is “Timing, Timing,Timing! 

Our timing for economic policy changes has been out of step with the economy for a long time.

We need to change economic policies based on how the economy is performing not on political whims. Congress cannot act fast enough to change the stimulus policies they have enacted during the recession cycle, to prevent those policies from becoming destructive to our economy, during the inflation cycle. This is why the “Policy” is guided automatically by how the economy is operating.

To create an economy that doesn’t create deep national recessions and national cycles of high inflation we need to end the Federal income tax code, and replace it with a State Gross Product Flat Tax to fund the federal government. The tax would be the same for all States. The State income tax form would have a line on it for the filer to pay a certain percentage of their taxable income to the Federal Government. We could there-by limit the amount of money the Federal Government can take out of the economy, and eliminate tax policies that cause a large majority of the people in all the States to do the same thing at the same time. 

This change in our tax system would empower the States, and the people of the state with the power to provide the needs, and services they wanted from their government. There are some things that the Federal Government should be responsible for to facilitate a better union, but when the States joined the union they became “indivisible”, not “indistinguishable”. 

The diversity of our people make our nation stronger. It is no different for our economy. Strengthen the differences of the states, to strengthen our national economy, and society. One size does not fit all. If each state adopted the Zero Inflation Taxation Policy, we surely would return to a “land of opportunity” again. All the states would not go into the cycles of inflation, and recession at the same time. Our economy would once again be the people’s economy. Creating a balanced national economy that would maintain the opportunities for people to stay employed, start businesses, and prosper by working at increasing, and maintaining their standard of living. 

To have these policy changes enacted the people must join together and focus on them alone. All the members of Occupy Wall St, Tea Party members, the Unions, and members of the working, and middle class must join together and support these three changes to our economic policies. 

We need to increase economic opportunities so the working class, and the middle class can work to improve their financial condition, and improve their standard of living by being able to maintain their accumulation of wealth thru the cycles of high inflation and deep recessions. Thus helping to end the misery of poverty, and decrease the large wealth gap between the impoverished, and the riches 1% in our economy. 

We would still have a long term capital gains tax rate to reward productive investment, and to encourage risk taking. The value of money would increase during the inflation cycle, just like raising  rates do, because of the decrease in the tax rate on savings and money (debt) investments, without increasing cost of production and consumption.

When the tax rate on saving, and money investment is at the same rate as investments in hard capital investments, the of money (debt) as an investment will equal an inflation expectations investment. This automatic change in our tax code will allow production the time it needs to balance supply with demand, reducing inflation expectation investments which causes prices to increases, and higher inflation rates. 

Leonard C. Tekaat, aka First Occupier is an economic scholar, author, and retired small businessman with over forty years experience in home financing, and real estate investment. He has been working on changing a flaw in our economic policies, that continuously widens the wealth gap, since 1981, when he wrote the book , “Inflation The Economy Killer”. He is Chairman of a special Committee For Economic Reform and A Better Economic Future and a former candidate for the California Congress. 

For more information go to: www.foreclosurecrisissolved.wordpress.com or www.recoverygovforthepeople.wordpress.com/

ARE YOU UP TO IT. DO YOU WANT TO CREATE AN ECONOMY WORTH OCCUPYING FOR YOURSELF AND YOUR POSTERITY? WHERE YOU HAVE THE OPPORTUNITY TO SUCCEED. LET’S NOT JUST SAY,…NO,….. LETS SAY… YES!!!

Remember what I said, “Change only comes about when you have a “Plan” which benefits all parties that are involved. The individual person can see how it will help their situation, and they are willing to stand up for themselves, and unite with others to be heard.”

We must demonstrate in front of the local branches of the big banks, and the head quarters of Fannie Mae and Freddie Mac. We need to make the message load, and clear by carrying signs demanding the financial sector adopt the Ascending Interest Rate Mortgage, and the monthly principal reduction policy to restructure all the primary home mortgages in the country.

To get the message out, demonstrations must be publicize by the news media to increase our voice. Call the media to let them know when, where, what you are doing, and why you are doing it. Make it very clear what you want the financial sector to do. Explain to the media that the restructuring, and principal reduction should not be paid for by the taxpayers. The financial sector should absorb any reduction of the principal balances, because of what they did to our lives, and our economy. Also, the financial sector will be saving billions of dollars in foreclosure, and other cost due to selling a home in a depressed housing market. The financial sector will also be benefiting from an improving primary home market, as the foreclosure inventory is sold to home buyers.

Hand out a flyers, so people can read it later, and have information about where they can obtain more information.

GOD BLESS AMERICA……. AND GOD BLESS YOU!!

Leonard C. Tekaat, aka First Occupier is an economic scholar, author, and retired small businessman with over forty years experience in home financing, and real estate investment. He has been working on changing a flaw in our economic policies, that continuously widens the wealth gap, since 1981, when he wrote the book , “Inflation The Economy Killer”. He is Chairman of a special Committee For Economic Reform and A Better Economic Future and a former candidate for the California Congress.

For more information go to: www.foreclosurecrisissolved.wordpress.com or www.recoverygovforthepeople.wordpress.com/

Search for Occupy Fany.Fredy on facebook to locate our facebook page. Join our open Occupy Fany&Fredy Group Search Leonard Tekaat on facebook.com

By SHAILA DEWAN

The New York Times

Home values have fallen so much in Arizona that almost half the people with mortgages there owe more than their homes are worth. So when federal money became available to help stem the tide of foreclosures, the state flagged that group for help.

If banks would forgive some of a homeowners’ mortgage debt, the state said it would pay half, up to $50,000 of a $100,000 loan reduction. Despite the generous terms, most banks balked.

Only three homeowners have been approved for debt reduction since the program began in September 2010. A major obstacle has been that the two largest mortgage guarantors, Fannie Mae and Freddie Mac, will not participate — in Arizona or elsewhere. No loans are eligible for the state’s program if they were bought and held or securitized by the two companies, which are now under government control and guarantee more than 70 percent of the country’s home loans.

“It is extremely difficult for the principal reduction program to be successful” when Fannie and Freddie opt out, said Shaun Rieve, a spokesman for the Arizona Department of Housing.

The companies’ policy against debt forgiveness, or principal reduction, has blocked widespread use of what many believe is an indispensable tool for fixing the housing problem.

The state attorneys general have been insisting that debt forgiveness be a part of the multibillion-dollar settlement they are negotiating with big banks over faulty mortgage practices. Smaller investors and companies that service home loans have stepped up debt forgiveness for troubled borrowers as well.

Not Edward DeMarco, who as acting director of the Federal Housing Finance Agency oversees Fannie and Freddie. Even though he recently signaled that he might make it easier for homeowners to refinance into more favorable loans, he has held his ground on debt relief. Fannie and Freddie say reducing the principal is bad for business and bad for taxpayers.

Critics counter that banks and investors have benefited from the government response to the housing collapse while borrowers have largely been left to sink. Just last week, a report by the inspector general of the Federal Housing Finance Agency said that Freddie Mac had failed to pursue Bank of America aggressively for compensation for bad loans, despite warnings from a senior staff member.

“It’s sinful, is the word I would use, that they won’t do this,” said John Taylor, president of the National Community Reinvestment Corp., referring to debt forgiveness. “And the only reason they won’t is they don’t want to realize the red ink that’s already on their books.”

Inevitable losses

In other words, they are delaying taking inevitable losses on shaky loans.

White House officials say that though taxpayers essentially own Fannie and Freddie, the administration lacks authority to require DeMarco to comply with its policies, which encourage principal reduction through a handful of programs. The Federal Housing Administration and the Veterans Affairs do not allow principal reduction on their loans either.

Large lenders have resisted debt forgiveness because of fears that it creates a moral hazard, meaning it could encourage borrowers to take out risky loans in the future because the consequences would not be so bad, or default to qualify for principal reduction. They argue that other types of loan modifications achieve the same goal.

Proponents of debt forgiveness argue the failure to reduce debt is hurting the economy, postponing inevitable losses and costing more in the long run. While 28 percent of all loans that are modified go into default again within a year, loan modifications involving principal reduction are more successful.

Resisting forgiveness

In the latest sign that debt forgiveness might make financial sense to some on the lender side, the nation’s second-largest mortgage insurance company, PMI Group, has found a way around Fannie and Freddie’s policy. PMI, which shares the credit risk in many Fannie and Freddie loans, has offered to pay some underwater homeowners, those who owe more than their home is worth, if they make payments promptly for several years, a de facto principal reduction.

While the company would not disclose what percentage of the principal was covered, a spokesman for the Loan Value Group, which administers the program for PMI, said that on average it was 5 to 7 percent of the loan amount but could be as much as 30 percent.

Fannie and Freddie’s rejection of principal reduction may simply be postponing losses that will occur anyway. Sharon Wells, a retired real-estate agent who lives on Social Security, said the modification by Chase Bank of her Fannie Mae mortgage led to an increase in the principal rather than a reduction, even though she already owed about 30 percent more than her home, near Phoenix, was worth.

40-year term

Wells, 66, said she had heart trouble and had outlived her doctor’s prognosis, and there was no chance that she would live to pay off the new 40-year term, or that the house would regain its previous value before her death, meaning the lenders would ultimately take the loss anyway. Wells had been preparing to sell her home and downsize when the market crashed.

“The logical, pragmatic thing, the thing that would have helped this country the most, would have been to write this loan down to a realistic number so we could have the normal buying and selling of homes,” she said.

But Fannie and Freddie maintain that deciding who merits principal reduction raises concerns about fairness. They argue that if future lenders believe there is a chance that borrowers will not have to repay the entire amount, they will price that risk into their loans, raising costs for everyone.

The companies say the goal of making monthly payments affordable is achieved equally well by forbearance, which allows part of the principal to be subtracted from the calculation of payments and instead tacked on to the end of the mortgage. “We’re not sure what is gained by giving up the right to collect that principal after the forbearance period ends and the borrower has regained financial footing,” said Brad German, a spokesman for Freddie Mac.

But debt-forgiveness backers say that forbearance does little to increase a borrower’s willingness to pay.

“The banks are trying to shoehorn an affordability fix into a negative-equity problem,” said Frank Pallotta, a managing partner of the Loan Value Group. “About 35 percent of all defaults are at least in part strategic,” he said, meaning that even if a financial mishap like job loss is behind a homeowner’s decision to stop paying, being underwater is a factor.

Negative equity

About one in five homeowners with a mortgage is underwater, and the total amount of negative equity is estimated at $700 billion to $800 billion. While many of those borrowers are coping with self-inflicted wounds, the problem is not limited to subprime loans.

Among mortgages backed by Fannie and Freddie, a vast majority of which are prime, the percentage of underwater homeowners is virtually the same as the percentage among all mortgages. The problem has led to calls for an across-the-board write-down, a solution that is expensive and unnecessary, says Mark Zandi, an economist at Moody’s Analytics.

“I don’t think the problem is as deep as people think,” Zandi said. Just enough principal reduction is needed to shrink the share of foreclosed homes on the market, which would allow prices to rise, he said. Homeowners would be less likely to default if prices were increasing, he added.

Servicers providing principal reduction have devised ways to reduce moral hazard. In Arizona, the program was restricted to homeowners with moderate incomes who had resisted taking out equity loans during the boom. Ocwen Loan Servicing, whose loan modifications outperform the national average, evaluates the homeowner’s budget before determining whether principal reduction would result in a net gain for the investor, who otherwise might face a steeper loss in foreclosure.

Ocwen, based in Atlanta, has also begun offering shared appreciation plans, in which part of a borrower’s principal is forgiven, but if the home is eventually sold at a profit, the owner must share that profit with the lender. As for moral hazard, Steve Bailey, chief servicing officer at PennyMac, a company that bought up shaky loans, said that failure to reduce principal was to blame, not the other way around.

“A loan that is modified and left at 200 percent loan-to-value invites the moral hazard,” he said. “You’re telling a person that they need to live in this house that’s severely underwater, paying more for housing than they need to, and looking around their neighborhood at homes that have gone through foreclosure and are available for much less.”

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People were given mortgages that were bound to fail if the housing market turned downward or interest rates increased. Families need a mortgage offered to them that they can financially succeed at to increase their disposable income, and their confidence for our economy to improve.

Money has moved into Wall St. the federal government, and large businesses. They have been able to restructure their debt.  A majority of the working and middle class have not been able to restructure their debt.  Money must find its way into the primary home sector for that sector of the economy to heal. 

The depressed primary home market is a major drag on our economy. 70 to 75 percent of our economy is consumer driven.  Homeowners need to be able to restructure their mortgages to improve their financial condition, and improve their confidence. With higher disposable incomes and renewed confidence the consumer will increase aggregate demand, which will put people back to work again. This will help lower the unemployment, and the foreclosure rate, and the federal deficit. 

I agree that markets are not perfect. People are not perfect. People make markets. Some people have moral faults.  This is why we need rational regulations, and laws in our society. We need regulations and economic tax policies that do not encourage people to do things in an economic cycle that are destructive to our economy. Timing of changes to economic policy is very important.

I also believe that we have a flaw in the making of our economic policies. The flaw is that we rely on a politically divided 535 member committee to determine economic policy. Most members are from the legal profession who are trained in legal matters, not economic policy. Our economy is a dynamic economy which is continually changing from the recession cycle to the inflation cycle. We have a static income tax system, (guiding policies) which stays the same as our economy changes during the economic cycles of recession and inflation. The static nature of our income tax directs people to do things with the reward of lower taxes, which can be destructive to our economy if the reward of lower taxes remains in place in the inflation cycle. Congress cannot agree to change economic tax policy quickly enough, before policies that they have enacted during the recession cycle, become harmful to the economy, which creates the high inflation cycle, and bubbles, which causes the Federal Reserve to raise interest rates. Higher interest rates reduce demand from the bottom of the economic ladder. This causes an enormous amount of misery for the lower classes with unemployment, foreclosures and bankruptcies. It is my belief that the excess demand in the market place should be decreased with the income tax during the inflation cycle, before the Fed raises interest rates.

What is your opinion on this very important matter? 

I have outlined what needs to be done in the following article. 

Alternative Mortgage Terms, Private Sector Solution for Job Creation and Economic Recovery 

Many economists will tell you that the depressed condition of the primary housing market is one of the main reasons the economy has not fully recovered. The unemployment and foreclosure crisis has been put on a back burner because, so far, no one has presented a good solution for it. I believe if we empower the people with the tool they need, they will bring about their own economic recovery without the government increasing it’s debt. 

We created the current financial crisis when the middle class and other people were offered, and they accepted mortgage terms that were destined to create economic defaults. The collapse of the primary housing market destroyed an enormous amount of the middle class’s disposable income, and confidence. This is what must be repaired before any more roads and bridges are repaired to increase economic activity. We will be able to pay for repairing our infrastructure when the economy stands up tall, and proud again as it has in the past. 

The new mortgage terms should be similar to the current 5/1 Adjustable Rate Mortgage, but with the following changes. The Ascending Interest Rate Mortgage starting interest rate should be 3% or lower based on the ten year US Treasury Note. The interest rate would increase .25% per year. The interest rate would stop increasing at 5% or the 30 year fixed rate interest rate, whichever is lower. The down payment on new mortgages would be 10%.  A lower down payment would require mortgage insurance.  A person wanting to make a new purchase of a home or refinance their existing home  would have to qualify at a 5% interest rate, with a 3% or lower starting interest rate, so we reduce the chance of new defaults. 

When a person refinance, or restructures their mortgage from a 6% mortgage interest rate to a 3% mortgage interest rate their disposable income is increased. If their interest payment each month is $1500.00 at the 6% interest rate, after their mortgage interest rate is reduced to 3% their interest payment drops to $750.00. Their monthly disposable income is increased by $750.00. If you multiply the $750.00 by millions of households you increase aggregate demand on Main St. by hundreds of times. But you want to argue that you have reduced the investors’ disposable income by the same amount. The question is; what will people do with the increase in their disposable income they receive? The investor will not consume as much as the middle class, and working class families. Besides what is different from when interest rates where decreasing in the 1980s from 21% to 7%. People and families were refinancing their mortgages then as they need to now. Nobody was concerned that the investor was losing purchasing power. We called it prosperity, and growth. 

To solve the underwater mortgage problem, underwater mortgages should be reduced an additional 33% of the monthly principal, and interest payment each month until the value of the home equals the unpaid balance of the mortgage, or up to 10 years whichever occurs first. By lowering the unpaid principal balance monthly, instead of all at once, the home owner will have hope, that sooner than later their mortgage will equal the selling price of the home. They will not add the home to foreclosure inventory. The mortgage will remain a performing mortgage asset, and will maintain its highest book value. Both parties give up a little for economic recovery. The borrower has lower payments on a faster declining mortgage unpaid balance. The bank, and investor are receiving mortgage payments on a larger mortgage than if they foreclosed on the home, and sold it in a depressed market. When demand for homes increases, and prices are increasing 1 to 2 percent a year; the unpaid balance of the mortgage is decreasing 1 or 2 percent a year, the unpaid balance of the mortgage and value of the home will meet somewhere in the middle of the two factors. The financial sector will save billions of dollars in foreclosure, repair cost, sale cost. They will be saving on attorney fees, legal cost, fines, and penalties they will be paying for the Attorney Generals settlement, and investor law suites. 

We should start offering these terms to primary home buyers who want to buy a foreclosed home, to eliminate the foreclosure inventory. We should make the new mortgage available to all conforming priced homes after the maximum amount of the mortgage the government will guarantee is lowered. These terms would only be available to owner occupied single family homes.  

On all existing mortgages it does not matter that the mortgage is larger than the resale value of the home.  As long as the person is willing to continue to pay their mortgage payment, it irreverent. The main objective is to prevent homeowners from adding their home to the foreclosure inventory. Unless the financial sector modifies the terms of the mortgages, and lowers the unpaid principal balances, of the underwater mortgages, as outlined, as the economy deteriorates more, and more homes will be abandoned or turned back to the bank. We have to do something different from what is being done now. What we are doing now is not working to create jobs, and facilitate an economic recovery. We cannot wait 30 years until all the underwater mortgages are paid off, foreclosed, or the homes are abandoned. We need an economic recovery NOW, NOT LATER!!  

Fannie Mae and Freddie Mac, for their own benefit to reduce foreclosures and abandonments , should send a modification letter to the homeowners of all the primary homeowner mortgages that they hold in their portfolios. Stating the mortgage’s old terms, and that the terms of the homeowner’ mortgage’s will be changed to the new mortgage terms upon the home owner agreeing to the new terms. The increase in disposable income, created by the decrease in the interest payment, multiplied by millions of reduced payments, will increase aggregate demand the same  way as if you lowered the homeowners income taxes. Increasing disposable income in this manner would not increase the deficit. The deficit would decrease as the economy improved.

In real estate you may have heard the saying, “Location, Location, Location!” In macroeconomics the saying is “Timing, Timing, Timing! Our timing for economic policy changes has been out of step with the economy for a long time. We need to change economic policies based on how the economy is performing not on political whims. 

The Zero Inflation Taxation Policy should be enacted first, before the new mortgage is offered to the public, or very shortly thereafter.

Basically the Zero Policy works like this: As inflation begins to occur, or hard capital assets begin to increase in price more than one or two percent a year, the tax on interest earned on debt investments, and savings would decrease, based on the true annual inflation rate. At the same time, the interest tax deduction would decrease based on the true annual inflation rate. This change in our tax code would affect all sectors of the economy. The income tax code should not stimulate credit use during the inflation cycle. Savings and money investments should be encouraged during the inflation cycle to allow production the time it needs, to increase supply with the lowest possible interest cost. In this way the excessive use of consumption, and non-productive credit use during the inflation cycle would decrease. The value of money would increase during the inflation cycle, because of the decrease in the tax rate, without increasing cost of production and consumption. The price structure of our economy would not rise as quickly. Our products would remain competitive in the world markets. 

Fannie Mae and Freddie Mac have no trouble securitizing and selling the 5/1 Adjustable Rate Mortgage. The new mortgage is designed to decrease defaults, and the Zero Inflation Taxation Policy is designed to stabilize long-term interest rates, to help eliminate interest rate increase risk. Therefore Fannie Mae and Freddie Mac shouldn’t have any problem securitizing the new mortgage, and selling the securities. If they do have problems with sales, the Fed should sell their existing agency securities, (they will go up in value after the new mortgage is offered to the public), and purchase the new securities. The Fed should hold the new securities until the interest rate increases on the mortgages to above the 10 year US Treasury note rate. The Fed should then sell the new Mortgage Backed Securities. The new mortgage securities will be more appealing to investors, than the 10 year Treasury note, because the interest rate will be higher, and it will be increasing  .25% a year were as the 10 year US Treasury Note will not have this benefit. The 10 year Treasury note will also not be having the benefit of the Zero Inflation Taxation Policy. 

What will the new mortgage terms do for the economy? They will improve the housing market, stabilize prices, and then prices will slowly rise. They will improve the financial condition of Fannie Mae and Freddie Mac, which will save taxpayers billions of dollars. The new mortgage terms will increase people’s disposable income and confidence, which will increase aggregate demand, decreasing unemployment and foreclosures. Fewer people will be government dependent. More taxes will be collected as the economy improves and people go back to work. As we reduce our deficit, the dollar will strengthen which will allow interest rates to remain steady. Oil prices will decrease. Transportation fuel prices will come down. Production cost will decrease. The foreclosure inventory will be sold quickly to owner occupied owners. 

Currently Mortgage Backed Securities, issued by Fannie and Freddie, guarantee that the principal will be returned in full to the investor. If the homeowner refinanced the mortgage this guarantee is transferred to the new investor, unless the old investor signs a waiver on a restructure of the mortgage terms. I believe the current investor will remain in the MBS if the terms of the mortgages are changed as outline. Remember the security has an advantage of income over the 10 year Treasury note, and it is still currently backed by the full faith, and credit of the US Government. The Banks are currently paying almost nothing on certificates of deposits, checking accounts and savings accounts. So where is the money going to go. It’s going to stay where it’s at. It’s a no brainer. It’s a no risk investment that is paying a fair return, based on the inflation rate. The 30 year fixed rate mortgage will go the way of the dinosaur, if the new mortgage terms are adopted by the financial sector, because of the special circumstances that the economy is experiencing. Once housing is appreciating 1 to 2 percent a year, the mortgage can be taken off the market or modified to eliminate too much money flowing into the housing market. We do not want to repeat history with another primary home price bubble. 

The Great Recession was created by the excessive use of credit. To help prevent the excessive use of credit and increase the saving rate, when equity prices are rising too quickly, we need to enact the Zero Inflation Taxation Policy to help maintain economic balance in our economy. With the Zero Inflation Taxation Policy enacted, long-term interest rates will stabilize and not be prone to rising, which will create another recession. Stable interest rates and full employment will improve our nation’s standard of living and bring prosperity to our economy. Our economy will become more productive. Less “paper profits” will be created. Our savings will not be used to make inflation psychology driven investments and purchases, which helps create higher prices and more poverty. ( Government dependent people and higher deficits or taxes, equals bigger  government and government agencies)

Leonard C. Tekaat is a retired small businessman, financier, investor, author, economic scholar, with over forty years’ experience in the world of home financing and housing investment. He is the Chairman of a special Committee for Economic Reform and a Better Economic Future. 

He is asking for your help, and participation in the process of improving our economy and increasing the opportunities for people to provide for themselves. He plans to gain support to occupy Fannie Mae.  Fannie Mae and Freddie Mac are private corporations that the government has loaned billions of dollars, and are currently in conservator-ship. They for all practical purposes belong to the people. So let’s use them for the purpose that the government originally sponsored them for. They were sponsored to counter balance the private sector inability to finance homes when the primary home market deteriorates as the housing market is doing currently. Fannie Mae and Freddie Mac are the bottle neck that is keeping millions of underwater mortgages from being modified, or refinanced and homes from being bought and sold. If they would agree to purchase the mortgages with the terms I outlined in the Petition posted at Change.org, the banks would offer the new mortgage terms to the primary home buyers, and home owners that want to refinance their mortgage. If they restructured (refinanced) all the mortgages they hold in their portfolios, the economy would improve, the unemployed would be employed and the Federal Debt would decrease without large cuts. He needs your help and all the members of Occupy Wall St, the Unions, every member of the working class and middle class to change economic policies, to increase economic opportunities so the working class, and the middle class can work to improve their financial condition, helping to end the misery and decrease the large gap between the impoverished 99%, and the riches 1% in our economy. 

One of the Petition’s sections pertains to the Pledge of Allegiance. Larry a visitor to Leonard’s facebook page, liked the idea of changing the Pledge of Allegiance to include the words “responsibility and opportunity” on Leonard’s page: www.facebook.com/leonardctekaat/ He needs everyone to be proactive and click the link and sign the Petition at 

http://www.change.org/petitions/stop-the-unnecessaryforeclosures-and-uneployment-crisis-with-new-mortage-terms

 The other six parts of the Petitions pertain to the new mortgage terms, eliminating the federal income tax, and fixing our economy. We will need all the support we can get to make it happen, so share this info with your friends, family, followers, news media and contacts. Go to www.whitehouse.gov/click the “contact the president button,” and leave a link to this article. http://foreclosurecrisissolved.wordpress.com/wp If he gets a flood of links someone will pass it on to President Obama, or one of his economic advisers. We can do this! Let’s make the Petition  go viral!    Sign the Petition to improve your and your children’s future.

http://www.change.org/petitions/stop-the-unnecessaryforeclosures-and-uneployment-crisis-with-new-mortage-terms

This is very important. We need to eliminate the misery for millions of people and families created by the Great Recession of 2008, and close the wealth gap between the 99% and the 1% !! 

Unless the people can change the direction of Congress, and the White House, he fears that there will be blood on the streets. 

If we can get 100,000 or better yet, one million signatures on the Petition it would have the shock effect we need and increase our negotiating power. It would as if 1,000,000 people showed up on the White House’s lawn all at one time. Can you imagine the good we could accomplish and the changes we could make?!!! ….LETS DO IT NOW!!! Have you ever wanted to walk on the White House’s lawn? EACH AND EVERY SIGNATURE WILL COUNT. DON’T BE LEFT OUT OF HISTORY. Please, Please, Go to Change.org and to view, and sign the Petition, democracy works when people take part. The sleeping giant has awakened, we are him. 

http://www.change.org/petitions/stop-the-unnecessaryforeclosures-and-uneployment-crisis-with-new-mortage-terms

 
Leonard C. Tekaat

aka firstoccupier
for inquires or comments

firstoccupier1981@yahoo.com 

For more information read the other articles at

www.recoverygovforthepeople.wordpress.com and the other linked websites

Quote, “A rising tide raises all ships.” President John F. Kennedy.  A financially strong working and middle class and an improving primary home market will help heal the  economy!  Leonard C. Tekaat, Economic scholar, Author

We need to “END THE FED INCOME TAX, REPLACE with a STATE GROSS PRODUCT TAX“

Currently our economy has two major entities that tax incomes. A majority of the fifty States have a business, and personal income tax, and the Federal Government does the same. This situation is costly, and a burden for people, and businesses to comply with all the paper work, and regulations. It would be more efficient to eliminate the federal income tax, and replace it with a flat tax on the gross state product of each state. Each state would pay the Federal Government quarterly the same percentage of its state economy’s product as each other state does. The Federal Government would not have the expense, and the difficulties of dealing with over three hundred million people, and millions of businesses. The Federal Government would be only dealing with fifty state treasurers.

The States would determine how they would levy the tax, so that it would be the least disruptive, and beneficial to the growth of their economy.

The States should pass an amendment to the US Constitution to change the law, which allows the Federal Government to collect income taxes, and put in place this plan to fund the Federal Government. The States would continue to be allowed to collect a tax on income.

The US Constitution gives the States, and the people the right to participate in the amendment process by petition, association, peaceably to assemble, and free speech and press. It is commonly known as participation in the democratic process !!!

Please sign the Petition if you agree!…..Now!!  

“THE ASCENDING MORTGAGE” with “MONTHLY PRINCIPAL REDUCTION” for “UNDERWATER MORTGAGES“!!  To reduce the unemployment and foreclosure rate.

The economy needs a new mortgage for it to heal itself. In a recent poll, released by CNN 10/23/11 on The State Of The Union broadcast, 83% of the businesses polled said, that the primary reason they were not hiring more help, or expanding their business was a lack of demand for their products or services!  We need to create a new mortgage with terms that allow people to succeed and increase their disposable income. The new mortgage terms will Increase million of people’s confidence, and disposable income, which will increase aggregate demand. With total demand increasing, the unemployment rate will decrease. The increase in disposable income, and aggregate will jolt the economy back to life, creating a sustainable economic recovery. The starting interest rate, on the new mortgage, with the 10 year US Treasury note at 2% should be 2.75% or less. The interest rate would increase .25% a year. The interest rate would stop increasing when the interest rate equaled the 30 year fixed rate mortgage interest rate, or 5%; whichever is the lowest interest rate. The person would qualify at the 5% interest rate. The mortgage would only be available for single-family owner occupied homes.

Because it is the correct thing to do, and the correct way to do it, and it helps balance the economy quicker, underwater mortgage’s unpaid principal balances should be reduced monthly, each time a monthly mortgage payment is made on a single family primary home mortgage. This procedure will encourage people to stay in their homes, and not add them to the foreclosure inventory. It will maintain the mortgage asset at its highest book value, as the economy balances itself. It will make Fannie Mae, and Freddie Mac profitable again, and strengthen the rest of the financial sector. The fact is, that banks are only as strong as their customers. Be they a homeowner or the government.

The Ascending mortgage is better than the Adjustable Rate mortgage, or the fixed rate mortgage for the economy, because it increases disposable income, and confidence in the beginning of the mortgage term, similar to the indexed mortgage. But unlike the indexed mortgage the homeowner, or buyer will know in advance what their future housing cost will be, which increases their confidence to take on the responsibility of a 30-year contract. The financial markets would act no different to the introduction of the Ascending mortgage, than if all at once a majority of homeowners elected to refinance, or buy a home with the 5/1 ARM. The fact is; they would embrace the new mortgage terms, because it is beneficial to all parties connected to the housing market, and the economy in general. This is because of the following change, to our guiding policies; we are proposing that will stabilize long-term interest rates.

Read “Alternative Mortgage Terms, A private Sector Solution For Job Creation And Economic Recovery. www.foreclosurecrisissolved.wordpress.com

President Obama called for bold, and decisive action from the G-20 meeting this morning. He can encourage Fannie Mae, and Freddie Mac to offer to purchase a mortgage with the terms outlined above. If the Conservator, Mr. De Marco, of Fannie and Freddie continues to stonewall against helping the economy improve, he should be replaced, or Fannie and Freddie should be temporally Nationalized, and made public property, to recover the billions of dollars the taxpayers have loaned these private corporations.

President Obama read: “Alternative Mortgage Terms, A private Sector Solution For Job Creation And Economic Recovery.

www.foreclosurecrisissolved.wordpress.com

Please sign the Petition if you agree!…..Now!! 

Enact the “ZERO INFLATION TAXATION POLICY” to “CLOSE THE WEALTH GAP”!!

The Zero Inflation Taxation Policy would change how we combat inflation, and inflation expectations. Currently the Federal Reserve uses higher interest rate policies to reduce demand, and money creation in our economy during the inflation cycle. The problem with this method is, that higher interest rates reduce demand from the bottom of the economic ladder by increasing the unemployment rate, personal bankruptcies, foreclosures and small business bankruptcies. The bankruptcy of small businesses decreases competition, and allows big businesses to get larger. The “Policy” changes this by taking excess demand from the top of the economic ladder with the income tax. The economy will continue to function normally without the employment, foreclosure, or the bankruptcy rate increasing, as we reduce inflation, and inflation expectations. The middle, and working class would be able to increase their wealth, over a longer period of time, reducing the wealth gap between the classes.

Please sign the Petition if you agree!…..Now!!  

We need to “CREATE REAL WEALTH” for “JOB CREATION” not “PAPER PROFITS”

We have lost a large portion of our manufacturing base to overseas producers. We must create an economy that encourages the producers in our economy to be able to produce products in our economy in an environmentally friendly way. If other economies are ruining our earth, for future generations, by not putting into effect regulations, that match our environment protection requirements, then a levy of some type should be applied to level out the cost of production of products in our economy. Trade agreements with other countries must be free, but equal. I am for allowing other countries to provide opportunities for their citizens, but not at the expense, and unemployment of our middle, and working class citizens. All tax preferences that encourage companies to out-source their production should be eliminated. If there is one thing that we have learned to produce in our economy, better than anyone else, and that is “paper profits” Paper profits only create higher prices, and more poverty. We have to get back to creating real wealth in our economy to increase the health, and standard of living of all our citizens.

We have three entities in our economy, the enterprise entity, the financial entity, and the government entity. The financial sector, and the government were created by the enterprise system to increase, and facilitate the exchanging of goods and services. Instead of the financial sector serving the enterprise system, the enterprise system is serving the financial sector. The financial sector, and the government have become the tail wagging the dog; instead of the dog wagging the tail. The financial entity, and the government entity both depend on the enterprise entity for survival. Why are they slowly destroying the enterprise entity that houses, feeds and clothes them?!!

Note: Since the financial sector’s product is money, care must be taken to preserve the honesty, and morality of the sector, or it can destroy the enterprise sector.

Please sign the Petition if you agree!…..Now!! 

We should have “FIFTY STATES with ONE FED. GOV. not ONE FED. GOV. with FIFTY STATES”  Strengthen The Differences Of Each State To Improve The States And National

In the beginnings of our nation we had thirteen states, and one federal government. As time has progressed the number of states have increased to fifty, and the federal government has become the primary focal point, and money manager of the economy. We need to reverse this occurrence, and make each state a contributor to the federal government, to help pay for national goals and responsibilities. The states should become the primary money manager of their economies. Each state should be solely responsible for guiding their society and economy. We look to Washington D. C. to collect additional revenues for the states, and send the money back to the states. When in reality the state’s population knows best what their citizens need, and want from their state government.

Please sign the Petition if you agree!…..Now!! 

The fact is that we became “INDIVISIBLE not “INDISTINQUISHABLE,” “ONE SIZE DOESN’T FIT ALL”

When the states formed a union we chose to be indivisible, the states did not choose to be indistinguishable. When a federal government sets national tax, and social policy, and the Federal Reserve sets national monetary policy, the states lose their individuality. President Kennedy once said,” All ships rise with a rising tide;” this is true, but most of us live on the north American continent, which is more than three thousand miles wide, from the Pacific Ocean to the Atlantic Ocean, and our country extends from the Canadian border to the Mexican border, and further south to the tip of Florida. Each State has their own economy. One state might have a good economy, at a certain period of time, and another state might be in a cooling off period after having a period of strong growth. This is why the states should be in control of the guiding policies of their economies. If each state adopted the “Zero Inflation Taxation Policy”, each state’s economy would be as efficient as possible in creating real wealth, and therefore be able to increase the wealth of their middle, and working class population, thereby reducing poverty, and at the same time, reducing the government’s social liabilities. The monies saved can then be used to improve our broken down infrastructure to further improve the productivity of our States, and national economies. Our country would truly become “the land of opportunity” again!

Please sign the Petition if you agree!…..Now!!

Lets add two words to The Pledge,” LIBERTY, JUSTICE, RESPONSIBILITY and OPPORTUNITY FOR ALL”…….

Recently CNN reported that the 9th District Court of Appeals did not agree that the word “God” in the Pledge Of Allegiance violated the “separation of church and state clause” in the US Constitution. I agree with the Judges. it is my opinion that people should not object to use of the word God in the Pledge. Take one “o” out of the word good, and you end up with the word God. The word God is a representation of goodness to the humanity of the world. God has many names. The names of God do not represent a person, or spiritual entity that can solve all your problems, or give you all your needs, and desires. You could change the word “God” in the Pledge with the word “goodness”, or any other similar word, and it would have the same meaning as the word God does.

The Committee For Economic Reform and A Better Economic Future, which I am Chairman of, has posted a Petition, at the White House Petition site that proposes that we add the two words “responsibility” and “opportunity” to the Pledge.

To better remind our children of their heritage, our children need to learn, at a young age, that liberty, and justice can only exist in a democracy if people take responsibility for themselves, and the process of democracy. Participation is essential to obtaining democracy’s highest calling of social equality, and respect for other people’s lives, and property.

Only with participation can justice be achieved through the courts, and on the streets through peaceful participation in group awareness demonstrations.

This is a land of opportunity. They should be proud of what earlier generations have created, and sacrificed for. Each generation is obligated to future generations to carry the torch of progress forward. Our children should learn that through persistence, and a good work ethic, they have the opportunity to achieve whatever they can dream.. Each morning they should be reminded that with freedom comes responsibilities, and opportunities in this nation under God, with liberty, justice,responsibility, and opportunity for all.

Please sign the Petitions if you agree!…..Please!! 

Please take the time to participate in the democratic process to improve our children’s future. Time is running out. We have only until Mar 2012to reach the 25,000 signatures needed to gain the support we need to make it happen. The few minutes that it will take you will make a big difference. Go to http://www.change.org/petitions/stop-the-unnecessaryforeclosures-and-uneployment-crisis-with-new-mortage-terms  to veiw the Petition!

Thank You for caring.

To the Middle Class and Small Business Owners:

We must improve the economy and increase opportunities so people can provide for themselves and their families. Currently the chances that a person will succeed are being reduced every day.
The economy must improve and the unemployment and foreclose rate must decrease by fifty percent. Interest rates must not rise or we will create another recession!
The people of our nation have gone through two and a half years of economic hell. Not much has changed for the middle class and small businesses since the Great Recession of 2008 started. The unemployment rate has not improved very much, foreclosures are increasing, and the enterprise economy is very weak.
My name is Leonard C. Tekaat. I am a retired economic analyst and economic scholar. I have over 40 years’ experience in the financial world of home financing, small business and investing in the housing market.

We have the opportunity to improve the lives of millions of American families, if we restructure people’s mortgage correctly, without any cost to the government or the taxpayers.

 
It is true that housing has become more affordable as prices have come down. Yet we still do not have a viable primary home market. There is a weak primary home market, because we are not using the correct mortgage terms to improve the housing market. We must change the way we are trying to improve people’s disposable income, their financial condition, the housing market and the economy. Federal government deficit spending is a flawed economic recovery policy.
What is needed to improve the housing market and the economy is a mortgage with new terms that will increase people’s confidence and disposal income, over a long period of time. With increased confidence and mortgage terms that fit today’s economic conditions, the economy will improve. The new mortgage terms will improve millions of people’s disposable income and it will bring people back into the economy and the primary housing market.

With increased aggregate demand in the economy, primary home prices will stabilize and then slowly increase in price. With equities increasing, instead of decreasing, financial institutions will be able to offer more favorable terms, but with new policies in place to help prevent economic bubbles from occurring.

For more detailed information about The People’s Economic Recovery Plan and the Zero Inflation Taxation Policy go to www.foreclosurecrisissolved.wordpress.com or www.recoverygovforthepeople.wordpress.com

I became involved in changing the policies that guide our economy because responsible middle class families are losing their homes and are becoming government dependent. I want our children and grand children to be able to realize the American Dream of a better future for their posterity.

The “Big Boys” and the “Moneyed” got the “Gold Mine”. The middle class and small businesses got the “Shaft” (bill). The middle class and small businesses get to be unemployed, foreclosed upon, go bankrupt and shut their business’s doors.

While big businesses and the federal government get to restructure their credit obligations’, small businesses and the middle class are shut out of the recovery process by not being able to have their credit obligations restructured.

If you are sick and tired of the people getting the “SHAFT” lets work together to improve the middle class and small businesses’ financial condition; the backbone of the American economy. When small businesses and the middle class are down the economy is down.

Sincerely
Leonard C. Tekaat

Please answer these questions. Then copy the survey to your e-mail and send to so we can send the results to Congress.  economysflaw@yahoo.com the author.

Do you own a home? Yes_____ no_______

Did you lose a home to foreclosure? _____Yes ______no

Is your home’s mortgage underwater? ______Yes ______no

Would you support a financial policy change that would lower your mortgage balance each month until it equaled the value of your home? _____Yes ____no

Have you thought about giving your home to the bank because the mortgage is under water?_____Yes ____no 

Do you want to keep your home if at all possible. ____Yes _____no

Do you itemize your income tax deductions? _____Yes _____no

What sector of the economy do you work in? Government ____ Enterprise ____ Financial____

Are you unemployed? _____Yes _____no

Do you receive a benefit check from the government ____Yes _____no

What is your approximant income level? ________________

Will you give up a portion of, or all of the interest deduction for consumption, business and investment reasons during the inflation cycle, for more stable interest rates, lower long-term interest rates, and a more stable enterprise economy? ____Yes _____no

If it were made available would you agree to and benefit financially from a restructuring of your primary home mortgage with the following terms?

Starting interest rate would be 3%. Interest rate would increase 1/4 % a year until the mortgage interest rate reached 5%. and then remain at 5% until the loan was paid off. If your mortgage were underwater the financial institution would forgive an additional principal amount, each month. equal to 30% of your total principal and interest monthly payment until the home’s value equaled the unpaid balance of the mortgage, or ten years which ever was the shortest time. There would be a modest fee to cover the cost of creating the modification agreement.

Yes___________No_______________Why___________________________________

Currently the government holds a majority financial stake in Fannie Mae and Freddie Mac, two private government sponsored financial corporation. The government is “by the people and for the people“. Therefore we the people own a majority stake in these two corporations. We should have a say in the mortgage terms and foreclosure policies of the mortgages that these corporations hold, control, or buy. Ninety-five percent of our home mortgages are held or controlled by these two corporations! We the people should use our financial institution to create a long-term sustainable economic recovery.

Banks are responsible for collecting the payments and enforcing the terms of the mortgages. They service of our home mortgages.

The new mortgage terms will stabilize the primary home market, reduce future foreclosures and increase total demand in the economy, which will decrease the unemployment rate. With total demand increased it will cause the foreclosure inventory to be sold in a much shorter time than has been predicted. If we can financially strengthen F&F and the economy, the taxpayer will not lose any money from the loans made to F&F. Fannie Mae and Freddie Mac will be able to pay back, to the US Treasury, all the money that it has loaned them.

Will you petition the government to encourage Fannie Mae and Freddie Mac to offer the new mortgage terms to the people for their own benefit and for the benefit of the qualified middle class and all existing people that have a mortgage held by Fannie Mae and Freddie Mac?  Yes_________ No __________ Why__________________________________________________________________For more detailed information on the Peoples Economic Recovery Plan and the Zero Inflation Taxation Policy go to www.foreclosurecrisissolved.wordpress.com/ and my other websites. The People’s Economic Recovery Plan will not cost the taxpayer a dime.

If you are unemployed, your home is being foreclosed upon, or are just sick and tired of getting the “shaft”(tax bill to clean up the mess the “big boys” made), join a growing number of people that want to change the guiding polices of our economy to increase opportunities so they can provide for themselves and their families, and provide America a better financial, and societal future.

The middle class does not want to become government dependent. We have worked hard to be self-sufficient. If the Financial Institutions and government continue on the path we are on, it will mean the demise of small businesses, and the middle class. We need people that are not afraid to stand up to be heard. To take a proactive position about their future, and the future of their nation. Join the R.E.B.E.L.S. it is free.

Please get involved for your children, and their posterity’s future. There is a better way to improve our economy than to put them into debt to the Federal Government, which will ruin their chance at the American Dream of a better future for their posterity. Our e-mail is economysflaw@yahoo.com Connect on www.facebook.com/leonard.c.tekaat/ Our Tweet handle is: “recessionkiller”, join the conversation,

Go to: www.foreclosurecrisissolved.wordpress.com/ for The Middle Class’s Rebuttal Speech To President Obama’s State Of The Union Address and The letter to The Federal Reserve, How The Fed Can Do More Harm To The Economy. The People’s Economic Recovery Plan is at www.recoverygovforthepeople.wordpress.com/ and at www.economysflaw.wordpress/ you will find over 25 articles, including Zero Inflation Taxation Policy. Is President Obama Making A Mistake, The Means of Exchange, Repeating the Mistakes of The Great Depression. You will find a more detailed copy of the article that appeared in the Bakersfield Californian on Feb. 14, 2011, “Solution To Foreclosures Will Decrease Unemployment And Government Deficit” at www.foreclosuresolution.wordpress.com/ or www.foreclosurecrisissolved.wordpress.com

Message To Tea Party Leadership and Fellow Members:

The Tea Party needs to present to the people solutions to the major problems that the middle class is facing today, primary home foreclosures, unemployment and a weak enterprise economy.  A positive message that our young adult citizens will be able to find jobs will increase the ranks of the Tea Party Patriots.

Yes, cutting the size of all governments is good. Yes, cutting waste and abuse is good. Cutting programs that are not authorized by the constitution is good.  If the programs that need to be cut are not eliminated by Congress, the programs to be cut should be determined constitutional or unconstitutional by the courts.

All of these cuts may or may not strengthen the enterprise system. The cuts may make it worse for the middle class until the enterprise system can return to its former strength. The enterprise system will need to return to the productive growth and strength the system will need to be able to employ the people that are currently unemployed, and the people that will lose their jobs because of the cuts.

The process that the cuts will help strengthen the enterprise system and create jobs in the private sector must be made clear to the people. The Tea Party Patriots, or conservative Republicans have not released a written policy statement on this subject yet.

If the Tea Party only supports cuts in programs, it will not strengthen the Tea Party, because people must realize that the cuts will create more unemployment and more foreclosures as people lose their income, and then their homes.  The families and people that lose their jobs will blame the Tea Party, and the conservative Republicans when they lose their income and their homes.

If the Tea Party offers solutions to the foreclosure and unemployment crisis, along with the cuts, it will become a major political party. By supporting the policies that are outlined in the following article, the policies will strengthen the enterprise economy, and increase the membership of  the Tea Party Patriots.  We wil become the party that support the middle class and small businesses.

Please read the following article article.

Economic Analyst Creates Solution To Unemployment and Foreclosure Crisis

New Mortgage Terms Will Increase People’s Disposable Income. Decrease Mortgage Payments, the Unemployment Rate, Government Deficits, Principal Balances, and Strengthen Our Financial Institutions

It stands to reason that if we can increase a large portion of the population’s disposable income without deficit spending or creating too much money, inflation expectations would not be created. With confidence in the value of the dollar increased and stabilized we can get on with the business of raising the standard of living of all our citizens. We can turn our attention away from hording gold and other commodities to protect our wealth. Real economic growth can be obtained. Full employment can be achieved and the federal and state deficits can be decreased by increasing the growth of our economy.

 
The People’s Economic Recovery Plan does not cost the taxpayers a dime. It does not require the federal government to purchase the bad mortgages or help homeowners with their mortgage payments. Nor does it require the federal government to pay the banks to modify the mortgages. It only require the people to stand up and be heard. 
The Federal National Mortgage Association, nicknamed Fannie Mae, and the Federal Home Mortgage Corporation, nicknamed Freddie Mac, has operated since 1968 as government sponsored enterprises (GSEs) 
Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt’s New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Banks and mortgage investors are doing the same thing during the Great Recession. Fannie Mae was established in order to provide local banks with investor money to finance home mortgages, in the secondary mortgage market, in an attempt to raise levels of home ownership and the availability of affordable housings and financing.

 
Fannie Mae and Freddie Mac are currently the major players in the home finance and foreclosure crisis.

 
These financial institutions own or have control of the majority of our home mortgages.
They are the financial institutions that determine what the interest rate and terms of most mortgages will be. The banks service most of our home mortgages. The banks collect the mortgage payments and enforce the terms of the mortgage contracts.

 
We the people should make the best use of Fannie Mae and Freddie Mac, to help facilitate a long term sustainable economic recovery.

 
First of all, let us introduce ourselves. We the people, are the middle class. We don’t ask very much from our government. We work hard to become self-sufficient. We want a fair shake from our enterprise economy, and our financial institutions, Fannie Mae and Freddie Mac.

 
We want a mortgage, and economic policies that allow us to succeed. Currently we are fighting an up-hill battle; many of us are losing the battle and have become government dependent.

 
We want to keep our homes. If we can restructure our mortgages with terms that make sense, we will continue to make our mortgage payments, and not allow our homes to go into foreclosure. The new mortgage terms we want will reduce government deficits, the unemployment rate, and improve the financial condition of the financial institutions that serve our economy.

 
We want the Zero Inflation Taxation Policy to be enacted. This change in our income tax code will affect all consumers, investors and businesses. We do not want our economy to create another worldwide economic crisis. This policy will discourage the excessive use of credit during the inflation economic cycle. The excessive use of credit when equity values are increasing too much causes most financial economic crises.

 
How will new mortgage terms and the Zero Inflation Taxation Policy help our economy?
Many economists argue that we must reduce the unemployment rate first to solve the foreclosure crisis.

 
This assumption is wrong. It is the other way around.
Aggregate demand and people’s confidence must be increased over a long period of time to have a sustainable economic recovery.
.
The foreclosure and underwater mortgage problem must be addressed first to improve the unemployment rate and total demand in our economy.
How we go about increasing aggregate demand is very important for the future of our economy.

 
If we can increase aggregate demand without increasing the money supply too much, as deficit spending stimulus programs do, the dollar will increase in value. With confidence in the value of the dollar restored, we can then get on with increasing the standard of living of all our citizens, not hording gold or other commodities to protect our wealth.

 
If done correctly, a restructuring of the middle class’ mortgages with a lower starting mortgage interest rate, and a principal reduction plan will increase total demand, which would allow our economy to recovery with less money creation than with deficit spending programs.

 
The new mortgage terms must also be acceptable, and beneficial to mortgage investors, and the financial institutions. If it is not beneficial to them, they will not embrace the new terms, and offer the mortgage to the public.

 
Currently the financial institutions are offering the homeowners the 5/1 Adjustable Rate mortgage. People don’t like this mortgage because the interest rate can go up each year after 5 years.
The new mortgage, will have a lower starting interest rate than the current 5/1 Adjustable Rate Mortgage. The interest rate on the new mortgage will increase at 1/4 percent a year, and stop increasing at 5 percent.

 
This change in the 5/1 ARM will increase primary homeowners disposable income substantially the first year, and then taper it off as the economy improves, and employment increases.

 
For example, a family with a six percent mortgage interest rate. The new mortgage would have a three percent starting mortgage interest rate. If they currently have a $1500.00 monthly interest payment, the interest payment would drop to $750.00.

 
These terms would be available to every primary homeowner, with or without an underwater mortgage. If you multiplied that $750 dollar increase in purchasing power by millions of people, aggregate demand on Main St. would increase enough to facilitate an economic recovery from the middle up.
The new mortgage terms will allow underwater mortgages to have their principal balances reduced monthly, equal to an additional 30% of their monthly mortgage payment.

 
The monthly reduction in principal balances is good for the economy in general, for the financial institutions, and for the homeowners. If the homeowner can see that sometime in the near future, the home’s value will equal the unpaid principal amount of the mortgage, they will not add the home to the foreclosure inventory.

Well that’s all great for the homeowner. How do mortgage investors and the financial institutions benefit from the plan?

The benefits of the new mortgage terms to financial institutions and mortgage investors are the following:
1. The home and the mortgage will become more valuable with the homeowner remaining in the home, and continuing to make their mortgage payments. Also the homeowner will be protecting the home, and maintaining it.
2. By reducing the principal balance monthly, the financial institutions do not need to mark down the mortgage to the current value of the home. The mortgage remains a performing asset, and maintains a higher value than a non-performing asset, a foreclosed home, or a short sale.
3. By maintaining most of the value of the mortgage on their books, the financial institutions do not need to continue to re-capitalize themselves with federal government debt.
4. The home’s value will, sooner than later, pass the unpaid balance of the mortgage as the home increases in value because of the increase in aggregate demand. In other words, the collateral’s value will stabilize and then increase. The increase in the value of the collateral will strengthen the financial condition of the financial institution.
5. Even though the interest rate has been reduced for the first year, and then increase for 6 years, the financial institutions will be collecting interest on a much larger loan than if they sold the home at market value, and put a new mortgage on it.
6. The financial institutions do not have the added expense of a foreclosure, a sale, the home’s security, property taxes, damages, repairs, insurance and legal cost.
7. The principal reduction process for the underwater mortgages will only last 10 years, or until the home’s value equals the then current possible selling price of the ‘s
8. With an increase in total demand, it may take much less time to balance the supply of homes to demand. In that case the lien holder will not need to subtract very much off the unpaid principal amount.
9. The plan will allow the primary home market to stabilize in a much shorter time than has been predicted.
10. Many mortgages can be restructured without much cost, with a modification agreement letter sent to the homeowner by the financial institutions that hold unsecuritized mortgages.
11. There is no need to re-qualify the homeowner before the modification letter is sent.
If the homeowner fails to make the new lower payments, then serve them a foreclosure notice.
12. With aggregate demand increasing, employment opportunities will increase. This should make it possible for the homeowner to get a job before the home is foreclosed.
13. Most investors and second lien holders would prefer restructuring the mortgage, under the new terms, to a foreclosure, short sale, or a refinance. The reason being is that with a foreclosure, short sale, or a refinance, the mortgage will be reduced to below the current market value of the home. Any part of the mortgage above the current value of the home will be lost.
14. The foreclosure inventory will be quickly sold to primary homeowners. To qualify for the new mortgage terms the home must be owner-occupied. With the foreclosure inventory reduced, housing prices will stabilize, and then slowly rise.
15. When a person buys a new home or pre-owned home, the buyer will have to qualify using the maximum 5% interest rate, but their starting interest rate will be the same as everyone else.
16. With the economy operating at full potential the financial institution will make more money than if the economy is in recession.
Currently the only way the banks will loan money to Main St. is if the Federal Government guarantees the loan. Under the current monetary policies can you blame them? They don’t know when the Fed will raise interest rates again and cause another recession. The Zero
Inflation Taxation Policy will correct this situation. It will stabilize interest rates and reduce the cost of long term loans because the savings and money investment rate will increase during the inflation cycle, without increasing the cost of credit.
With the new mortgage terms the collateral prices will stabilize and prices will slowly increase. Banks will again be able to make loans to Main Street.

 
With the new mortgage terms available people can have their mortgages restructured without the financial institutions increasing the money supply, or the financial institutions going through a lot of unnecessary paper-work. The state and federal governments’ deficits will decrease, and full employment will be obtained. The foreclosure crisis will be resolved.

 
WAIT A MINUTE. ISN’T THIS HOW WE GOT IN TROUBLE THE LAST TIME. WERE NOT INTEREST RATES TOO LOW FOR TOO LONG? NO … We got into trouble because a credit bubble was allowed to expand for too long until it popped.
The financial institutions and mortgage brokers were talking people into signing a mortgage that the buyer couldn’t afford to pay as the interest rate changed on the mortgage. The stimuli in the income tax code for people to go into debt and the high primary home annual appreciation rates made people too eager to sign these mortgages with bad terms.

 
Interest rates were not too low before the financial crisis occurred.
Before the credit crisis occurred, mortgage interest rates were 100% above the Consumer Price index.

What was wrong was the Consumer Price Index did include the cost of owning a home, only the cost of renting a home. So when we had inflation in home prices of 30% a year, the Fed said the inflation rate is 3% and the mortgage rate is 6% there is nothing wrong. There is no bubble in primary home prices. The Fed or Congress did not attempt to deflate the bubble. A few months later the bubble popped and market crashed!

If the financial institutions say that a 3% starting interest rate is too low. I would like to point out that 3% is the same amount above the Fed Rate, when the Fed rate was 2.75% and mortgage interest rate was 5.75%. The markup is a little over 100%.

With the Fed Rate at .25%, the 3% mortgage interest rate is marked up 12 times. If an automobile manufacturer built a car for $20,000.00 and marked the car up 12 times, the sale price of the car would be $240,000.00. With the mortgage interest rate a 5% that is a twenty times markup. The car would sell for $400,000.00.

 
My point is that the banks are marking up trillions of dollars of debt. This is why the banks were able to pay the TARP money back so quickly. The financial institution’s profit margin is currently very large.

 
How do we get the financial institution to realize that the new mortgage terms will be beneficial to them and would make them profitable again?
Fannie Mae and Freddie Mac are currently the major players in the home finance and foreclosure crisis.

 
These financial institutions own or have control of the majority of our home mortgages.
They are the financial institutions that determine what the interest rate and terms of most mortgages will be. The banks service most of our home mortgages. The banks collect the mortgage payments and enforce the terms of the mortgage contracts.

 
When I talk about the financial institutions, I am referring to Fannie Mae and Freddie Mac. Currently our government is the conservator of these financial institutions. The government is by the people and the government is for the people. Therefore Fannie Mae and Freddie Mac are under the conservatorship of the people.

 
Taxpayers have a majority financial stake in these financial institutions. Therefore the citizens of the United States own these corporations and should have a say in their home foreclosure policies and terms of the mortgages they own, control or purchase.
We the people should make the best use of Fannie Mae and Freddie Mac, to help facilitate a long term sustainable economic recovery.

 
Fannie and Freddie should make the business decision that in the long run restructuring or refinancing all the mortgages would be a good business move. Congress or the people should inform the financial institutions about changing their policies. Congress is the voice of the people. If the US Congress won’t do it, then the people should peacefully picket the corporations until they change their business policies.

By improving the financial condition of the middle class we will strengthen the financial condition of the financial institutions. If we can make Fannie Mae and Freddie Mac profitable again the taxpayers will not lose any of the money that we have loaned them. 

The government has passed many regulations to help prevent another bubble from occurring. The solution to preventing another bubble has not been enacted yet.

 
For more information Google three words “foreclosure crisis solved” to go to my websites.

 
Be sure to read part two of this article.

 
Sincerely

Leonard Tekaat
Leonard C. Tekaat is a retired economic analyst and economic scholar. He has over forty years experience in the financial world of home financing, small business. and investing in the housing market. He is Chairman of a special Committee for Economic Reform and A Better Economic Future.