The Obama programs may be fancy, but we know that just about everyone outside of the Obama administration is adamant that they are not working. I am almost adamant they are not working and it is because they are not targeted at Joe America. If you refer back to the previous post you will recall that currently about 21% of homeowners are underwater on their homes. Here is where my thesis is going to be open to debate but that is the nature of the beast as I have to make some assumptions. Lets assume that 15% of those underwater on their homes are still currently employed. You may ask what math I used to come up with this and the answer is none. This is more a common sense approach. I believe that those who are unemployed have for the most part already lost their home (and thus it is no longer part of the 21% of homes underwater) or they are in the process of being foreclosed on currently which will make up most of the difference between the 15% still employed and the 21% currently underwater on their homes. So now we need to recap where we are at:
- We are assuming that Joe America is the 15% of homeowners who are underwater currently on their home mortgage who are still employed and currently paying their mortgage.
- We know from the CNBC link on the previous post that there is close to $15 Trillion in Mortgage Debt outstanding and around $600 Billion in Home Equity Debt outstanding.
What we are trying to do now is provide both a Macro and Micro outlook on my these of how Joe America can be targeted with a specific modification program that would immediately revitalize the US housing market and economy.
Because he is still employed Joe America represents the best hope for turning around the housing market by creating an immediate floor in house prices which will in turn spur new construction, new lending, new spending by those no longer worried about their dissapearing net worth at home, and all of those factors combined will then lead to JOB CREATION.
From a Micro standpoint here is the solution:
Joe America has a first and second mortgage valued at $400,000 combined ($300K first and $100K second). His house is currently worth $300,000 and he is underwater by $100,000 today. He is employed and makes enough to pay his mortgage but times are tough and is getting fed up with his inability to work with his bank to find a way out of his house. He is mad because his is the first generation that will be penalized for a lifetime for buying a house and watching the home price drop 25% in 2 years. He is frustrated because he could by the same house he lives in today or maybe even a nicer one for $250,000 or something significatnly less than what he currently owes on his own underwater house. He is tired of reading about Obama program after Obama program meant to deal with the housing crisis but that dont apply to him because he still has his job and is still current on his mortgage.
Joe America is representative of the bulk of homeowners who are underwater on their mortgages in the US. Joe America needs a solution but not just a financial one. Joe America needs a solution that restores hope for his financial future which will in turn spur him to feel comfortable to spend money and revive the economy. Joe America lives in the greatest country in the world and with hope restored for his financial future will once again feel comfortable to travel, dine out, buy new clothes, and become the engine that revives the US economy.
In the next post I will explain how Joe America can partner with the US Government and his Mortgage holder so that all parties involved can make an investment today that will pay huge dividends tomorrow while at the same time ensuring the financial health of all parties involved.
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