Subprime Crisis calling for Social Entrepreneurs

I'm sure a topic like this will lure out Chris Cook because I know I've discussed this very matter with him at length. In his absence awaiting arrival I offer the Community Land Partnership, an application of Islamic Finance for shared risk and reward.

http://opencapital.net/co-ownership.htm

From my own stable, a perhaps more conventional for-profit approach and an ongoing campaign to leverage seed funding, deploying a microfinance approach to seed fund building projects.

http://www.p-ced.com/Projects/Ukraine/CrimeanTatars/tabid/63/Default.aspx

Both models I believe engender community will by design, either by sharing risk and reward or creating businesses which pays back into the community.

The CLP model I believe to have the advantage in being able to attract private investment capital from the private ethical investor, with the P-CED model aimed more at the overseas community in crisis and development aid capital, albeit repaid.

Impact will be made I believe by getting involved as grassroots activists, understanding the problems and needs of individual communities to make the case for doing it.

Hola Carlos, I would like to interview you regarding your model, please contact me, 786-419-2615 Thanks

Hello! Thank you for participating.

Jeff, you are absolutely right. Under existing laws and corporate forms it is possible to develop diverse forms of homeownership and financing. We need to creatively leverage the nonprofit sector's experience with micro-finance. The goals of business models that provide a homeownership alternative to existing industry practices, could be; pre-qualify, pre-sell, and diversify the risk across median to low income markets.

Consumers eagerly await social entrepreneurs that can help them out now! Buying your home is a commission driven transaction. No one gets his or her commission until the bank is happy. The bank also determines the value of your home. How many consumers can tell if the appraiser exaggerating the value of the home?

It looks to me that Home Finance Consulting service is needed. Such service would increase consumers’ safety in mortgage shopping, help them improve their credit score, differentiate between lenders and their trade practices and identify lenders with high foreclosures, lawsuits or excessive consumer complaints. All of which can save the consumer thousands of dollars in interest and fees.

Carlos

Thanks to Jeff for the intro.

The solution I'm working on in Scotland and Norway - part funded by the Norwegian Government - involves a variation on the US Community Land Trust which we call a "Community Land Partnership".

The radical thing about it is that it allows a new form of investment in property not a million miles away from a "Real Estate Investment Trust", and does not involve conventional "deficit-based" funding involving bank credit secured by mortgages.

The outcome is that property can be financed - or in the case of foreclosure etc , refinanced - at a fraction of the cost of conventional mechanisms.

The deal is this.

The Banks doing the foreclosing do not sell the properties but transfer them into the hands of a "Custodian" eg a "Not for Profit".

The Custodian is a member of a US LLC the other members of which are:

(a) a "Club" of "Occupiers" (formerly owners);

(b) a "Manager";

(c) an "Investor" ie initially, the consortium or club of participating Banks.

An affordable Rental is set in respect of each property and this is linked to an agreed measure of inflation. Part of this Rental goes to the Manager and a proportion is set to one side as a provision and held by the Custodian as a Maintenance Pool/ Sinking Fund.

The balance goes to the Investor as a return on Capital.

Here's the Alchemy.

These Rentals are pooled (in proportion to the outstanding loans), divided into proportional "units", and sold off to Investors exactly like the quasi REIT's they are.

The outcome for the Occupier is an extremely affordable rental, because:

(a) there is no capital repayment - this being a form of "Equity";

(b) the return on capital is maybe 2 to 3% (and unrelated to the Fed interest rate).

Anything the Occupier pays more than his rent makes him an Investor, and if he buys enough units, the income he gets offsets the rent he is due to pay: the result is therefore "ownership".

Moreover, if he maintains the property himself and the standard is approved by the manager, the result is he gets to keep the maintenance provision.

The outcome for Investors is of property-based units bearing an index-linked rate of return which would probably be of the order of 2 to 3%, and these units may be sold at any time. A pension fund dream, in the way it matches their liabilities.

Also, there will be no shortage of investors in the Gulf, because this is Islamically sound financing, there being no debt and no interest.

Moreover, there is a virtuous circle here: the affordability of the rentals makes it less likely the Occupier cannot pay, and therefore makes the income stream more certain.

Finally, the Manager has an incentive to ensure that there are no "voids" when the property is empty, and that the properties are in good order, because he receives more income if that is the case.

Everyone in a CLP is "on the same side".

In this model, the Occupier may change; the Investors may change; and the Managers may change but property is never bought or sold again.

It is essentially a "Cooperative of Cooperatives" and offers a way in which long term investment may be introduced to allow many property occupiers to stay in their homes, and affordably "rent to buy".

It's simple, but radical, and requires no change of any law, as far as I know.

Best Regards

Chris Cook

Chris, thank you for sharing the model. For context sake could you describe the real estate market you are working in? For example, here there are more homes than jobs. We also have a growing senior population that cannot afford to maintain their homes on a fixed income. The median year a home was built here is 1939. Job growth is happening but concentrated in hourly wage occupations. Although, home prices are low, hourly wage earners are unlikely to develop sufficient savings to purchase.

Perhaps some of these foreclosures could be prevented if the terms were recast over several generations, rather than the traditional 30 year approach. In this scenario, the current occupier would be more of a steward for the future. Also, if a hybrid entity, similar to a CLP, bought the land and leased the buildings long term to the entire family, rather than the individual, perhaps a more sustainable outcome could be realized. As for the type of entity, for-profit versus non-profit, why we leave such an important issue (housing) to the free markets is beyond me. Who becomes the ultimate master of whom?

I have read some of the answeres and must admit, you guys have some great ideas. I would like to go back to the point about teaching borrowers about their mortgage and credit.

I have researched credit and how it works for more than 7 years, then we applied the research to live case studies to get as close to the credit scoring model as possible. What we found was phanominal.

The credit scoring model is not just about paying your bills on time and keeping your balnce low. It is a psychological rating of weather you take risk, how much you take and how well you manage that risk. This makes it a very useful tool for an employer to use from a background check to asses the type of employee their hiring and Insurance companies find the information useful in assesing the risk of the possible insured. This same Risk Character Assesment can be applied to every area of a persons life and they will approach life situations very much the same way they approach their finances or credit.

We have found a way to use credit to help people develop better risk characteristics and use this as an opportunity to teach them about a system that has been contoling our economy based on our own ignorance of the system and help them create a strategy based on credit laws and scoring models to help them improve their scores, resolve and pay off (if necessary) current debt and remove outdated debt that according to the law should not be affecting their score.

We have a 90% success rate at helping people improve their credit scores by 15-40 points in 30-45 days and 40-100 point in 6 months. This means you can teach positive human behavior by providing "Effective Credit Education" and using the credit score to grade the results. Using that type of Literacy with the new FHA laws, we either help people find their way through loan modificaion resolutions or move their mortgage to an FHA immediately. If a homeowner gets a loan modification to start their mortgage over and put the payments on the backend of the mortgage, cleans up their credit (For Real!! Non-of this Financial Literacy with no credit real score increase agenda, non of this Credit Repair mess and non of this Debt Management stuff)then they can move into an FHA. We're actually trying this out in Chicago and by the Grace of God it is working.

The combination of Understanding Credit and the scoring system, Building Positive Risk Characteristics and getting an FHA Mortgage is a recipe for saving our country from this mortgage chrisis. Finally, we have come up with a way to get millions of people in on a workshops that will help them save their homes. Now if we could just get our Government to listen, we'd be able to help more people.

Sorry for the long response, but this is a subject I have given my own livelyhood to help make change. We are just now getting some people to look at us seriously and I am very passionate about my work as I am sure all of you are.

By the way, I do believe this is best handled from a non-profit perspective especially to raise capital. The problem is all the funding is going to organizations who have been doing the same thing for 15 years and getting the same results, yet the numbers are getting worse and no one is saying "Hey, wait a minute, success should not be measured by how many people listen but instead how many are successful at using what they learn to deal with the real crisis." The organizations getting the funding refuse to see they are not as affective as they could or should be and have gotten so good at getting funding, they are loosing sight of how much more affective they could be if they'd only listen to knew ideas, concepts and approaches that didn't come out of their office, from their lobbying or from the a deal made with Legilature to keep their programs alive. Some non-profits have sold our communities out for a profit. What's with that????

Anyone can take the most qualified person, give them some literacy and take credit for the success of the consumer. But try teaching that same literacy to the least qualified and see what happens. What if we had a Literacy that works for the majority of the people and had outcome objectives that included resolving the crisis issue not just creating awareness that it exists and moving on to an issue that creates more money being saved in banks which allows the bank to use the money in private placement investing, then give the person who worked hard to save the money 4.5% interst if they're lucky? What does saving $1,250 in a bnak have to do with purchasing a home or saving your home? Saving money you can't afford to save is not Economic Development nor does it address the mortgage crisi, yet it is the major outcome objective of Financial Literacy.

How about we teach Financial Literacy that will SAVE OUR HOMES??? Maybe we'd see some real Economic Development instead of the Economic Crisis. Just a thought.

Cheryl, congratulations on your success rate. With such high success rate you may want to consider an entrepreneurship model, for example the Tupperware model of business in conjunction with a brand name like Suzie Orman or Oprah to structure a business opportunity that serves to improve the community. Imagine how many people you would then be able to help! You would not have to ask for government or foundation help then, and it would be sustainable over the long term.

It is common to think that raising funds in the nonprofit sector is easier than the private sector, that is not my experience. If you can demonstrate that your business model can be profitable and socially responsible then capitalizing your venture should not be a problem.

A multi-generational approach is an interesting idea. McGill University thought of this idea as flexibility within the building envelope. So as the life-cycle of the family changes the housing can as well. Demographic trends and changes in the labor market will eventually force the issue of housing diversity in tenure and design.

There will always be a tug of war between private interests and public interest. Social enterprise can serve as catalyst for both. For private interests by demonstrating that innovation in housing products and services is viable and profitable. For public interests by achieving community well being through economic success, which could lead to sustainable policies.

Talking to your lender now about your delinquent mortgage can literary take hours. Lenders now face a cash crunch due to the increasing number of mortgage defaults. As a result they have trimmed their workforce and sent operations overseas. For consumers the poor customer service increases their loan costs and stress, as they cannot resolve their issue in a timely manner. For lenders the average cost of a foreclosure is estimated to be $58,000. For municipalities the cost of a vacant property can exceed $34,000 and lead to a loss of property tax revenues, lower property values and increase violent crime.

Are there nonprofit innovations that we can leverage with social investment and package as social enterprises to change this dynamic?

To me this is both simple and complex. It is simple because it is based on US tax law, making it cut and dry. It is complex because there are so many variables involved. So, the essence of this is, making a quasi-bank status out of a non-profit conglomerate. This is not theory, there exists a conglomerate consisting of the Wild Life Habitat Trust (WHT) a 501(c) 3 and it’s subsidiary the Affordable Housing Center (AHC) a 509(a) 1. Together they could be the financial mechanism the poor here use to build them selves out of poverty.

What makes this a quasi-bank? A 509(a)1 can hold assets and a 501(c)3 can issue revenue bonds on those assets (not that the latter is important to what I trying to say here). This designation gives AHC a unique ability to hold mortgages on houses it sells or collect rent on the ones it owns.

What is the connection between WHT & AHC that allows this relationship? WHT provides oriented strand board (osb) from the lands it manages for AHC to build houses out of.

What other factors figure into the make up? An ombudsman would buffer and protect the best interest of the people WHT-AHC serves. Additionally, the Grameen Bank micro-financing could be overlaid to ensure administered self-governance of the people by the people.

Another financial mechanism to consider: To me this is both simple and complex. It is simple because it is based on US tax law, making it cut and dry. It is complex because there are so many variables involved. So, the essence of this is, making a quasi-bank status out of a non-profit conglomerate. This is not theory, there exists a conglomerate consisting of the Wild Life Habitat Trust (WHT) a 501(c) 3 and it’s subsidiary the Affordable Housing Center (AHC) a 509(a) 1. Together they could be the financial mechanism the poor here use to build themselves out of poverty.

What makes this a quasi-bank? A 509(a)1 can hold assets and a 501(c)3 can issue revenue bonds on those assets (not that the latter is important to what I trying to say here). This designation gives AHC a unique ability to hold mortgages on houses it sells or collect rent on the ones it owns.

What is the connection between WHT & AHC that allows this relationship? WHT provides oriented strand board (osb) from the lands it manages and used in the houses AHC builds.

What other factors would figure into the make up? An ombudsman would buffer and protect the best interest of the people WHT-AHC serves. Additionally, the Grameen Bank micro financing could be overlaid to ensure administered self-governance of the people by the people.

WillIam Blake (757)547-8221

Blake thank you for your contribution. I think there is a wealth of examples of how to lend, improve the community and be profitable. An under utilized resource are the credit unions, which have been rather silent in this crisis. Are credit unions responding with unique products to assist homeowners with ARM's?

Credit Unions have the potential but normally are understaffed. It is enough to keep up with their mormal demands. You talk about how long it takes a bank to respond to a Foreclosure issue, just look at what it will take to prevent it as an outside source. Another thing that is scaring the heck out of me are the Non-Profits offering counseling that takes 8 weeks to complete, with a certificate of completion for people to prepare to purchase a home in the next 12 months? What is that??? That is crazy to expect that kinf of commitment from any one family to successfully complete a program for something a year away. Mortgages are changing every week right now and what is being done about the persons overall outlook. If it takes 8 weeks to explain how a mortgage works, we shouldn't be setting them up for a home, we should be setting them up for a part time job at some of these Credit Unions.....

If we better used Government Dollars to effectively train people in a way that kept their interest and was not just for the purpose of justifying yet more grant dollars with outcome objectives to get seat fillers and give a certificates, perhaps we could answer questions like your asking. That money should be use to give leverage to organizations like Credit Unions in this time of crisis, not wasted on training that most participants will drop out of. Especially when they find out they still can't buy a home. Yeah give them a 12 month outlook. That way when they can't buy a home by next year, the program is over and no one is able to be held accountable.

Right now they provide Governemt Dollars for a program called the AFI (Assets for Independance) Program. The Government matches funds to banks and credit unions along with the funds of the consumer to save money to 1) Purchase a home 2) Purcahse a car 3) Start a business or 4) Pay off Student Loan. Now you as the consumer are allowed to save up to $2,000 a year and the mathing funds is from $.50 to $3.00 (That's as hihg as I have seen). The Government also funds "Housing and Credit Training", "Salaries" and other "Administrative Cost". Now the failitator can get a grant for $2,000,000 and the outcome must only be measurable. Guess what the success rate of that program is across the country? 30%. That means they have a fall out rate of 70%. Why? People don't finish the program. In Chicago that rate is 12%. Now, what happens to the money that went into the program for the other 78%?????? I know a non-profit that has been getting this money for 8 years.

We need more effective programs and better ways to resolve this issue that is not about self serving but is commuinity serving.

This is why I do what I do from a non-profit perspective. I am hoping to shape a new mindset about our purpose and how we can help people with a for-profit idea in a non-profit way and actually make a difference that is profitable for everyone. For me it is not just about the money and believe me I could use some. It's about going back to the old model in the non-profit world to create new and better resolutions to age old problems. The real estate crisis is not new in minority distressed communities. In fact that's were most of the froeclosures came from. It didn't become a crisis until it blead across the whole country regardless of who you are or where your from.

What's the reason we're in a crisis in the first place? We had a bunch of programs that never worked so when you take those models and try to teach them to someone who would not normally bein the situation their in and it doesn't work over and over and over eventually the rest of the country goes into crisis along with those who were already in a crisis. You begin to see, we've been funding a bunch of programs with very little impact. If the current programs worked before, why can't they help everyone now???

This whole thing is amazing to me....

Cheryl, I get your experience. Being entrepreneurial and knowing that you need sales to survive would change customer service at nonprofits. Credit counseling, pre-purchase programs, asset building programs, etc. Could be bundled into a weight-watchers of home finance. I think people would pay to have the peace of mind that they made the right decision and conducted all due diligence. When you go on you own to purchase a home there a just too many things to know and silly things can easily distract you, oh! nice fireplace! Wait a minute it you are not shopping for shoes, you are buying a 30 year mortgage.

In this case you would not sell financial products, just conduct due diligence and help people improve their financial standing so they can get the home they need with financing that is sustainable. What do you think $99 for membership, other services on a flat fee basis?

Thanks for the idea. With memebership I could offer for people to have discounted opportunities to come to workshops for updated info and other Financial Literacy. We do charge a fee and unfortunatly I had to go up 5 times my orignial fee to get people's attention. Now I have more clients than I can handle. The work is outpacing my ability to keep up.

What we decided to do is take 2 minority distressed clients as non-pay and 1 discounted client for every 1 full pay client. Today alone I got 7 new clients. When I was charging next to nothing I couldn't get 7 clients in a month. Now we are getting appointments for the client and their spose.

Now That's Amazing!!!!

If you want your community to enjoy a high quality of life your local economic policies need to favor small business. When do home prices go up? When there are jobs. Who creates 80% of the jobs in a community? Small businesses. What are small business? Companies with 5 to 50 employees and sales of not more than 50 million. The communities that consider their assets from this perspective and package them as benefits to these entrepreneurs could dramatically improve their housing market.

If we recycle excess real estate owned properties as an small business employee housing benefits program then we could attract more small business, which would in turn increase jobs. A diversity of housing types and tenures benefits small business by stabilizing labor costs, increase skilled labor and maintaining population density. To make a small business district viable you need 5,000 residents within walking distance. Developing a diversity of housing opportunities helps maintain population density.

The goal of small business housing benefits program would be to market under-utilized real estate and increase population density. To achieve this a community could inventory its commercial, mixed use and residential properties mix. Identify profiles of companies that would find such properties desirable. A relocation proposal would include a housing benefits program for employees relocating. Such program would offer REO properties that have been rehabilitated to be energy efficient near their employment. It would also include different forms of obtaining ownership for example; rent-to-own or cooperatives.

Given the amount of underutilized real estate it is possible to develop housing options for the different wage levels including hourly employees. The program would be financed through combination of grants, low interest loans, tax credits and accessible market finance. The program would target small businesses in high cost centers and businesses with a significant number of employees with adjustable rate mortgages. The program would buy-out their loans and assists them in achieving ownership once again with reasonable loan in an energy efficient home. Combined the energy savings and an appropriate loan would enable families to grow financially. Their new financial footing would enable the growth of small businesses, improving overall community well being and creating new jobs.

A social enterprise can develop a community solution that responds to a market or government failure. Examples, co-housing responds to the housing industry failure to provide community oriented housing, Flexcar.com responds to the temporary need for a car in a manner that is more accessible than renting a car. Cohousing is self-organized and often self-funded by residents, they are developers and future homeowners. Flexcar, started as public/private partnership and grew their model from this partnership. If your enterprise offers a tangible value to the community, then you can consider different business models other than nonprofit. However, your economic and value proposition need to be economically viable.

There are several ways, each offers different forms of risk and rewards for example; 1. cooperative forms provide opportunity to form a group shareholders, so each person buys a share and their risk is limited to the value of the share, food and farm cooperatives for example; 2. Limited partnerships, where an individual is seeking to mitigate their tax burden and needs to invest to shelter capital gains or acquire capital losses;

Understanding that some people need to shelter capital gains and other need capital losses can help you raise capital for your social enterprise. It will be necessary to sell the idea, and back it up with a business plan, which is not the same as a grant application.

This post points to possibilities in housing markets that deserve thorough exploration. Partnerships between corporations and nonprofits open the doors to an infinite number of viable initiates. Among these are the adoption of sensitive, compassionate practices by real estate and mortgage professionals and cooperative educational opportunities for consumers. The current housing crises is a human issue that can only be solved through a shift in public policy and public perspective. Once society recognizes that human suffering is the primary cost associated with foreclosure activity occasioned by predatory lenders, the blight affecting vulnerable communities will hopefully subside.

Will the person the who has never received any help please stand up? The common good makes common sense. That is what I learned from the Midwest and Canadian Prairie people. The rugged Marlboro individual did not settle the prairies, it was people working together to create something that they could not on their own.

We need to apply common sense for the common good in both the housing and credit products. In the US we have a rapidly growing senior population and more people earning hourly wages than ever before. If you include the escalating costs of energy and food then it becomes clear that creating change in our views of housing and credit is necessary. Thank you for your post Ed.

L'usufruit et la nue-propriété sont une opération de DEMEMBREMENT DE LA PROPRIETE du logement que l'emprunteur qui ne peut plus rembourser peut NEGOCIER avec sa banque prêteuse . L'emprunteur grâce à ce démembrement divise par 2 sa charge mensuelle de remboursement car il n'est plus que nu-propriétaire occupant. Il récupère la pleine propriété 120 mois plus tard (10 ans) à la fin du contrat de DEMEMBREMENT négocié avec la banque.L'USUFRUITIER temporaire est un organisme du mutualisation des risques ou une sté d'assurances . Claude CALAFELL FRA.TE.LO FRAgmentation TEmporaire de la propriété du LOgement megabrikbauxite@orange.fr tel 00334.92.00.59.99

In the US. personal finances are a sacred space and people rarely discuss or compare credit products. An unfortunate side effect is that households facing foreclosure do not ask for help due to shame. Households facing foreclosure also ignore their lender's call for fear of harassment. One could say that the foreclosure process is punitive and leads to depression, self-medication (addictions), family instability, job loss, increased health problems, homelessness, and sometimes concludes in suicide. The Allegheny County Sheriff's office has documented 3 suicides to date.

Recovering from foreclosure is a lengthy process and could take years. Lenders could alleviate the impact by assisting households to relocate before a job loss occurs. Offering to assist households to relocate can reduce foreclosure costs for lenders. It is estimated that a foreclosure costs a lender an average of $58,000 US.

Carlos,

We ahve set up a slef-sustaining model for Social Development in Rural India, which is fully self-sustaining through active community participation. From our experience in developing the model in the above lines, waht we did first was to identify the basic problems that these rural folks were facing and through an organized door-to-door and one-to-one campaign involving the unemployed local youth messaging each & every household of localities with our brand of solution and requesting for suggestions or opinions. This enabled us to gradually penetrate deep into the community to present our case and also enabling them to play a role in self-sustaining this model. once this was done - the door opened out automatically for the rural business folks to offer support in return for systems to develop their business worldwide. Incidentally most of their businesses are conducted through a shroud set up by agents to ensure no customer can directly reach them. We suggested that we could help them to present their skills in the lkargest Marketplace in the world - the US market. We suggested a team be present in the fair organized by the NABC every year to promote the cultural & various other related activities of Bengal. Money and support to actualize this dream has been offered to us to professionally handle the entire case and for ensuring that things were right each & every time. So Carlos the local folks where a project is selected for launch would be the best to finance and help the idea grow into a Resource Generating Tree.

Thanks

SBR

Thank you Sankha! It has been difficult to create community will on the subprime crisis issues due to consumers privacy about personal finances and the level of influence financial institutions have over all levels of government. The most successful model has done exactly what Sankha suggests, knock on doors locally, organize churches and business support where it can be found. NTIC http://www.ntic-us.org/ is a good example. They have organized consumers as well as developed relathionships with lenders to implement pipeline for loan modifications in order to avoid increased foreclosures in their communities.

Once such community will is established the issue becomes developing a business model that can become self-sustaining. In the case of NTIC it could consider forming a consumers cooperative that would provide future homeowners with education and support to avoid bad loans and lenders with unfair trade practices.

Sankha did you start with a brand solution? or did you launch the organizing effort and then developed a brand solution? Why do you think it worked so well?

Carlos, We started with a subject which is of utmost importance to the local folks. What was also done simultaneously was to actively involve the people to help this system to grow. So it was started as an organizing effort and has now achieved an identity as a product essential for each family. We have also deviated a little bit from the concepts of micro-financing into what we call micro-investments. The annual mandatory fee is Rs. 250 (USD 5)per family and they have been assured a return which could be as high as 10 times of the investment made (fees). So the system ensures that each and every investor gets benefits in cash or kind or both yearly which should atleast be double of the value put in. This is being promoted agressively by offer to provide them two important aspects - 1. Supply of basic requirements viz., groceries etc., at a largely discounted price as compared to the market rates 2. Providing them with a direct link to the marketplace with facilities for the continued development of their skills.

The annual contribution plus the other earnings per member family would help us to create a fund to finance innovation from amongst the enlisted members at rates unthinkable even by the micro-financing people. The survey that has preceeded the designing and planning of the system has been truly overwhelming. The project which is a partnership between an NGO and a for-profits comapny, should within 2009 be able to launch a Rural Capital Issue - which bt my estimantes would be over-subscribed many times. Invitations are already being received from neighbouring areas to take up their cases in line with our thinking. So loans against projects launched by enlisted members will receive total support of the system to ensure succes and thereby also ensure easy repayment. There will be a basic difference in evaluating a project - it would only look into how many peoples' lives the project's product or services will touch since the network will have its own captive audience through the door-to-door and one-to-one system.

Thanks

SBR

In attempting to assist 40,000 people deal with their subprime loan I found that entrepreneurs and industry folks to be most interested in effective solutions. Mortgage brokers, real estate agents and some credit counselors were seeking ways to help households in trouble, they would call and say "boy countrywide or other lender's name, sure did a number in our community", Some ideas for a quick response included:

Training community folks to document a consumer's subprime loan and household finances to propose a loan modification. In this case, trained local folks would visit homeowners in trouble at their home. Take digital photos of the house and their street. They would also help the homeowners gather all the documents they need, utility bills, loan documents, signed releases, loan modification request etc. Each counselor would have a portable fax machine so they could fax the documents to a central office.

The fax information would be converted to readable PDF documents, which would allow office staff to do keyword searches on mortgage documents enabling to identify the characteristics of the loan and principal actors. This analysis with the loan modification request would be sent to lender. Ideally one would have an agreement with lender to handle loan modifications. However, it is not necessary. Consumers can send loan modification requests to the lender without needing their permission to do so.

If the lender does not accept the loan modification and proceeds to foreclosure. The consumer can bring their loan modification request to motions court to answer their foreclosure notice. Hopefully, because the consumer was proactive in responding to their situation, the judge would consider their case more carefully and maybe rule in their favor.

If a lender does not respond to loan modification requests and their loans show signs of unfair trade practices, then social entrepreneurs can forward the information gathered from consumers to appropriate authorities in the US, the federal trade commission, FBI mortgage fraud unit, the state attorney's office and possibly the securities exchange commission. If these attempts do not succeed then organize the consumers to file a class action.

I was visiting the Pennsylvania's state legislature were I ran into the vice-president of the Pennsylvania Bankers Association. He let me know that the banks opposed any legislative changes because they were over-regulated. I asked, how do you propose to provide a safe mortgage-shopping environment then? No answer. Yesterday, the US Attorney announced a mortgage fraud task force SW Pennsylvania. Link to story: http://www.post-gazette.com/pg/08035/854679-100.stm?cmpid=latest.xml

Charges were brought against twenty four people. How much damage can one "bad actor" do? Mr. Pratt was convicted after perpetuating 200 mortgage fraud transactions. The FBI Mortgage Fraud unit will only investigate fraud if it exceeds the one million US dollar mark. The Federal Trade Commission only investigates multi-state fraud. So who is going to protect consumers?

Social entrepreneurs can consider providing services that provide safe mortgage shopping. Think of it as a white-collar crime block watch. Protect your home values, your neighborhood, and the sustainability of your municipality.

Curiously, even if you are the victim of mortgage fraud the lender stills expects to collect the loan from you and will proceed to foreclosure. At the American Securitization Forum, the industry awaits for lenders to disclose how many loans are high risk. Yes, they are still waiting for full disclosure. It seems to be clear that consumers cannot depend on their government to provide a safe mortgage-shopping environment. Can social entrepreneurs fill the gaps created by market and government failures?

Why is there such high level of mortgage fraud? Lenders utilized a two-mile radius for appraisals in their underwriting criteria. While a two-mile radius may be applicable in some markets it is not necessarily applicable to all markets. For example in Allegheny County it is possible to find two identical properties within a two-mile radius. However, one will be worth $200,000US and the other could be worth as little as $5,000. The two-mile radius appraisal and lenders incentives to make the “numbers work” made it easy for unscrupulous appraisers and brokers to push up the value of the home.

Lenders have also lobbied for low licensing requirements for brokers. This enables them to expand their sales force quickly at a low cost, which keeps their loan origination costs low. Unfortunately, for well-established brokers low licensing requirements translate to competing with individuals who have little commitment to their community and unscrupulous actors. Add loan products that did not require income verification and we have a recipe for disaster.

Counties could improve consumer safety in mortgage shopping by utilizing real estate public records. County real estate records could be searched for type of loan products, originators, lenders and foreclosure rates by zip code and product type. To facilitate such process counties could require a cover page, which describes the type of loan product and identifies the parties involved. If an originator or loan product is showing a high foreclosure rate the county can inform consumers and appropriate authorities.

By tracking the performance of loan products and originators counties can respond to lending practices that undermine their property tax base. Alternative if counties can’t perform this function then Internet based companies could provide such reports to consumers for a small fee, for example; providing foreclosure rate in a community or real estate value comparisons based on recent transactions and the performance of loan products.

This company would search public records and create reports that assist homeowners to improve their home and mortgage purchasing decisions.Reports could include; originators, lenders, types of mortgage products, foreclosure rate by lenders and originators, complete home comparables based on recent local transactions. These reports would be available by zip code or block quadrants.

If consumers could access real estate market reports based on local activity then they may make better home buying and borrowing decisions. This web based company could match its reporting system to web based maps. A company with search and mapping skills would be ideal. Goggle Inc.? Comparables with hybrid and street view would make this service very attractive. There are millions of mortgage transactions a year.

Imagine if it became the norm for consumers to purchase these reports? A profitable social enterprise! Lenders would then be encouraged to improve the reliability of their underwriting criteria, originators and mortgage products.

It took many years for the US auto industry to realize that there were a variety of needs and preferences in transportation. Not everyone wanted a big, fast car. It also took the auto industry a long time to recognize safety, economy and reliability as important features to consumers. Finally, it took them a long time to recognize that it was easier to recall a mistake than to pay the consequences. It could be said that the auto industry kicked and screamed its way into the future.

The lending industry finds itself in the same situation. In particular publicly traded lenders who in the pursuit of quarterly earnings and executive compensation packages have undermined the bank-ability of American households by promoting unsustainable credit products and trade practices. American households now have negative savings rate and the average consumer seeking credit counseling owes more than $30,000US of unsecured debt and has an income of less than $25,000US.

Can the lending industry innovate faster than the auto industry? Can it create credit products that increase the bank-ability of American households and yet be profitable?

The housing industry is also tied to the lending industry, producing housing options that are deemed bankable by lenders. The single-family home with the two-car garage is considered the soundest investment. Yet, due to the global labor market, energy costs and demographic changes the single-family home is likely to be the least viable investment into the future. However, our land use zoning also supports the dream of the single family, which creates shortages of alternative housing options. Land use zoning also limits the ability of entrepreneurs to develop housing alternatives for the changing American household.

It is difficult to expect timely change from industry. In many ways the sustainability of our local economies depends in changing our perceptions of housing. This change is most likely to come from social entrepreneurs and consumers seeking to create housing alternatives that suit them.

The challenge for social entrepreneurs is to devise the means to spark the community’s imagination to create housing diversity to improve the local economy. In our community seniors are still living in the family home. Most of these homes are older the median age in the area is 1939, they are large and require a lot of upkeep and are not energy efficient. However, most of these seniors are now retired and live on a fixed income, which makes it difficult for them maintain, repair their home or pay for utilities. Their home no longer suits their life-cycle.

Ideally, they would like to remain in their neighborhood, but do not want to live in a retirement home or don’t qualify for state subsidies. Most apartment buildings are not very accessible or have not been renovated. If I could, I would find a way to sell their house so they could in turn buy into a housing cooperative in their neighborhood. The housing cooperative would develop garden apartments or cottage-housing communities. This approach could potentially also free up some cash for them.

For the community it would create local jobs, keep residents with spending money in town and make a few seniors happier and healthier, saving everyone a little of bit money a long the way, as well as making money. The older homes would then be rehabilitated to be energy efficient and sold to employees of small local business through an innovative housing benefits program. Purchase options could include lease to own, nonprofit, government and market place financing. The municipality would then have a net gain in property tax payers, which hopefully would lead to improved community services and safety. Think about it!

Why a consumers cooperative? It would permit seniors to purchase shares in the cooperative, which would give them access to permanent affordable housing. In other words they don’t have to buy the home, but have the security of share ownership.

The cooperative could be the developer and property manager or it could contract out for such services. Some may say we tried a cooperative model and self-governance by residents did not work. I think that is an execution issue, cooperatives can work well, for example, REI Outdoor Equipment. In this case one would need to learn what is going to work for the consumers in terms of property management and what will promote a good sense of community.

Through share sales the cooperative could cover land acquisition, pre-development costs and provide equity for market financing. The monthly rents would cover long term financing costs and property management. The key is pre-selling the development and providing a turn-key solution for seniors to sell their home and relocate to appropriate housing.

Thank you to Social Edge for hosting this forum. I hosted this forum on behalf of Allegheny County residents with the hope that it could inspire my community to consider and find new solutions to improve our community.

I wrote what I observed and learned from experience. My colleague Randi was invaluable to this process, as she has actually saved many families and their homes from foreclosure.

In memory of Adriane Aul an inspiring community leader who worked towards making Pittsburgh’s future brighter. She is truly missed!

There have been recent articles suggesting that Allegheny County's foreclosure problem is not very serious. Allegheny County is loosing population at a rate of 3% per year. It is difficult to think that we can support more homeownership losses. The Sheriff's Office serves 600 foreclosure notices a month and has set up its own homeowner hot-line. I think that is a better indicator of the trouble we face. In addition we have about 16 months of housing inventory, in a healthy housing market inventory is normally six months.

The 40,000 number is based on the incidence of exaggerated incomes in subprime applications and households paying more than 50% of their income towards their mortgage. The 40,000 is the estimated number of households that will face foreclosure over the next five years. Whatever the numbers are is it acceptable to have 3 suicides due to foreclosures?

The Allegheny Sheriff’s office has stepped up to the plate on behalf of homeowners. He is proposing a similar agreement to the one developed in Philadelphia, which provides for a "conciliation conference" to be held for owner-occupied properties involving the borrower, an advocate for the borrower and an advocate for the lender 45 days after the foreclosure filing.

http://www.pittsburghlive.com/x/pittsburghtrib/s_575756.html

In comparison discussions with regulatory bodies such as the Federal Trade Commission and the FBI Mortgage Fraud unit led us to conclude that they were under-resourced and basically we would need to provide them with all the evidence necessary. It was not an impossible task as many of the nonprofits assisting homeowners have substantial case files. However, nonprofits were un-willing or unable to share and gather cumulative data. Perhaps what was holding back is that the finance industry is also a funding source for them.

So our thoughts turned to informing the Allegheny County Common Pleas Court. Yet, our legal counselors said that it would not be possible as our testimony could bias the judges. Even though on each occasion that we accompanied a client to court the judge would express that many households were loosing their home to foreclosure. Why not explain that in fact the loan products were faulty and lenders were encouraging bad lending practices? How could homeowners possibly make that case by themselves?

As an alternative we turned to the press and when they asked for clients to interview, we would give them the difficult cases. Our hope was that when the reporter contacted the lender to verify the data, the lender would workout an agreement with the borrower. Countrywide was pretty consistent with this approach, giving workouts as soon as news story was on the works. At least we were able to help a few clients this way.

http://www.foxnews.com/story/0,2933,391054,00.html Send a fax note to your mortgage lender letting them know that you are committing suicide because the bank is foreclosing.

The subprime crisis undermines the most basic of American ideals, the family. Your neighborhood is at risk; if your neighbor is foreclosed your property values go down. Your city or town looses property tax revenue, which increases your own property taxes at time when property values are going down. Your city looses population and along with it, taxes that could provide for a better quality of life, infrastructure, services, etc.

Does the rescue package solve these problems for us? Does the housing rescue package offer homeowners an exit out of homeownership, which allows him or her to keep their job and transition to renting in an honorable way? Does it require utilities companies and landlords to make housing available to people that have a foreclosure in their credit score?

There is a cost to not addressing these issues, directly and indirectly. You may have thought that the cost of rescue plan was high.

While in Harrisburg I ran into the VP of the Pennsylvania Bankers Association, he let me know that they opposed any regulatory changes that could curve predatory lending, they are over regualted, he said.

Now we have financial crisis and the request is for a blank check to the tune of 700 billion and a weak promise that taxpayers could recover some of the costs.

If American households were dealing with the banks they might suggest: - Stronger oversight and consumer protection on how FICO score data is used by banks; - Require that County Governments gather and release data on how credit products and originators are performing; - Require that banks pay mortgage brokers a base salary to reduce incentives for fraud; - Require County Governments to provide quarterly cumulative foreclosure reports by originator and bank to the FBI Mortgage Fraud Unit; - Require banks to report mortgage delinquency levels by zip code to the state; - Make credit education required for High School curriculum starting in 9th grade; - Eliminate title loop holes that permit lenders to keep foreclosed property without paying taxes by not updating the title changes; - Require County Governments to make real estate records publicly available in a consumer friendly searchable web site; - Require banks to have US based consumer loan services offices; - Require banks to provide full relocation assistance for households impacted by foreclosure; - Make it illegal to deny essential services such as utilities and communication services due to a foreclosure on households credit score; - Require nonprofits offering credit counseling services and building and selling homes to separate their credit counseling services into arms length entities. Unfortunately, nonprofits depending on banks for real estate loans or credit counseling grants are less motivated to address predatory lending; - Strengthen oversight and regulations over nonprofit credit counseling services to avoid conflict of interests, such as offering refinance options with specific lenders;

Executive pay limits, well we all like to dream! Clearly this the investors role, how do they feel now about executive compensation?

A local paper published this story: http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/reiland/

It made me sick, so I wrote this letter to the editor:

According to Ralph R. Reiland associate professor of economics at Robert Morris University the root of rotten mortgages was government intervention on “free” enterprise via the CRA Act. It is good story! And perhaps Mr. Reiland missed the “nothing is free” class.

He would have us believe that “redlined” neighborhoods and minorities forced the government to pass the CRA Act, which then forced the banks to loosen their underwriting practice. I can imagine a CEO explaining to shareholders, “ we had to do it, otherwise we could face a fine at least $10,000 and up to $500,000 if we did not provide credit to poor neighborhoods!” Shiver me timbers! That is a lot of money the shareholders would say.

“Free” enterprisers seem to be stuck at the Boston Tea Party. Perhaps, they don’t realize that we no longer live under a monarchy. The government is for the people by the people. That is freedom! As entrepreneurs we depend on government to create confidence in our trading abilities and the necessary safety to be able to do business. Free enterprisers could try running a business in a dictator-run country. Maybe then they would value government, “economic justice” and rule of law.

I wondered why it was difficult to get politicians to pay any attention to predatory lending and the high foreclosure rates our community has been experiencing since 1995. This Seattle PI article provides an insight into the why:

“Since 2001, the financial sector has given more than $2.1 billion to state and federal politicians, according to data from legislative watchdog groups. Of that, more than $900 million came from securities firms, banks and mortgage banks” http://seattlepi.nwsource.com/business/382707_mortgagecrisis09.html

Unduly influencing government policy to make your business profitable is not entrepreneurship! It is more like asking the people for a handout, through slight of hand.

Stable housing options are essential for individuals and families to achieve well-being. Unfortunately, the housing and lending industries focus on the single-family home as the ideal option has left many consumers without alternatives. It is similar to the American auto-industry focusing on big cars at a time when consumers want affordable, reliable and safe transportation.

In fact household types, size and incomes are undergoing significant changes driven by demographic trends, flattening of incomes due to a global labor force and increased energy and health care costs. For example; is likely that the “average household” spends twenty percent of their income on health insurance, yet underwriting criteria would suggest that a household can dedicate 30% of their income to housing and have 10% of unsecured debt costs. Tack on 20 percent on health care and add high energy costs and you wonder how is the underwriting criteria realistic?

A home only has value if it can be occupied, which means the homeowner has to have ability to repay. Mr. Warren Buffet suggest that bottom of the crisis is when housing prices reach real market value. For homeowners the question is, what is the price you can afford to pay for this house? Take into account all your living expenses and figure out what percentage of your income can be consumed by housing costs.

For social entrepreneurs this a unique opportunity to launch ethical product & service options that take market share away from harmful transactions such as rent-to-own scams and foreclosure rescue scams. It is also an opportunity revive our neighborhoods and small business districts through innovative property purchase contracts and financing options, as well, as to rehabilitate homes to higher energy efficiency standards.

Social entrepreneurs that identify ways to provide a reliable real estate transaction and construction services could open a new market niche. A market niche driven by consumers seeking housing stability, housing that is appropriate to their stage in life and a safe way to secure such housing options.

Exploring alternative means to provide safe, affordable and stable housing through a diverse ways of marketing, packaging and ownership structures. For example, why not set up a senior housing cooperative that is a development company? Seniors purchase shares in the cooperative and choose a development in which to live in according to their lifestyle choices. This way a senior is owner of shares in the cooperative, which gives them housing security and means to contract the necessary services to maintain the development. (Could owning shares of housing be a way to protect your housing from bankruptcy laws as result of a healthcare bill?) Then they can sell their home and move into a community that supports their lifestyle direction and ensures their health. A senior’s housing development cooperative would be better and safer option than reverse mortgage to fix up the old family home.

Capital from Wall Street or Washington is not going to get to your neighborhood soon enough. Don’t cross your fingers for HOPE it is going to take a long time and many homeowners will loose their homes to foreclosure. Think of it as Katrina, everyone knows they need help but the politicians are doing their thing.

Homeowners should figure out how to deal with their dilemmas and help each other learn to fight foreclosure. It is likely that many of your neighbors have the same lender and perhaps broker. Get together and read you mortgage documents, figure out what your financial situation is and then prepare yourself to go to the motions court to delay the sheriff sale (respond to the foreclosure notice). If several of your neighbors are in a similar situation you should book your appointments for the same day. Bring photos document your story, be honest and provide a proposal as to what you can afford or ask for the help you need to exit if you made a mistake.

Now that you have guaranteed lenders ability to pay with our taxes, could we ask a question? If lenders have guarantees then would it not make sense to declare a foreclosure moratorium for a year?

A foreclosure moratorium could help the people of America by: 1.Reducing the amount of distress sale housing inventory, which could help stabilize housing prices;

1. Providing time to homeowners facing foreclosure to find an exit strategy that allows them to keep their job, their kids in school and avoid homelessness;
2. Ensuring that our communities do not loose residents due to foreclosure. Population loss will harm our small business districts compounding the economic trouble we already face;
3. Assisting municipalities to retain their property tax base and not increasing the number of vacant properties, which leads to higher costs such as; increased violent crime and emergency services costs;
4. Eliminating additional victims of the credit crisis by reducing the potential for increased foreclosure and rent-own scams.

Perhaps this is too much to ask. However, ensuring that citizens have a stable housing situation during the winter and holiday months could only help reduce the economic crisis we face. Please consider the economic benefits of declaring a foreclosure moratorium for primary residences of households with subprime mortgages.

Sincerely, Carlos Gasca A non-voting Latino renter.

Fannie Mae and Freddie Mac announced their loan modification program. Unfortunately, the principal is not adjusted and if you are 90 days late it is likely that all the fees and interest costs are also added to the principal. Even if a consumer can obtain a 3% rate, they will be paying for years a home value that is not based on reality. In essence you will be working to pay off the lenders mistakes, which you are already paying once through the bailout package, now they want seconds.

Overvaluation of homes was a common practice among subprime lenders. So when will consumers in foreclosure set up a tent city in Washington Mall? What would it take to declare a mortgage payment general strike? Even with a new president it is not likely that lenders position will change. If consumers don’t demand a more realistic deal, it is like that government will not do more than window dressing. Yes, even with Obama in office.

Both Freddie Mac and Fannie Mae have announced a program to allow homeowners remain in their home as renters (finally!). This an important initiative, as foreclosure de-stabilizes families, which can lead to job loss. It also impacts municipal property tax revenues and local property values.

Unfortunately, this program only assists 8,600 households. Like the HOPE effort, it is too little too late to make any significant difference in our communities. It would beneficial for the federal government to dictate that all principal residences foreclosures go through court-mandated re-conciliation process. Give the courts the ability to write down mortgage amounts for principal residences.

Ideally, the courts would write down mortgages payments to 20% of a household’s income. The old rule of thumb 30% of income for housing does not take into account health care, transportation and utility costs increases. As well it does not reflect the fact the median income of an American household has not grown in the past 10 years. By reducing housing expenses to 20% the economic viability of a household is improved, which in turns improves our economy.

Great documentary on subprime loans and their impact. So far seven cities are taking a variety of lenders to court. I am still surprised by the lack of consumer outrage.

http://www.pbs.org/now/shows/506/index.html

The federal government finally announced its plan to address the high foreclosure rate created badly designed loan products and lack of government oversight.

The airwaves have been filled with extreme dialogue of responsible versus irresponsible borrowers. Investors are not mentioned at all, although Mr. Allan Greenspan placed our future in their hands. His assumption was that investors would ensure their investments were viable. Unfortunately, investors like CEO’s of hedge funds or banks only consider the short term return. As long they were meeting their profit goals there was no problem providing no document or other negligent loan products. In their mind they do not have any responsibility to their country, city or community.

Sadly, the housing rescue plan is more driven by industry interests, both profit and nonprofit, than consumer needs. To assist consumers the housing plan could have insisted in providing relocation assistance to households facing foreclosure. Such assistance would be beneficial to consumers, lenders and municipalities.

Relocation assistance would help households avoid job loss and possibly homelessness or suicide. For lenders it would reduce foreclosure costs and open an opportunity to sell their inventory to the rental market. Municipalities would benefit since households could remain in their community, helping ensure sufficient population density to secure the viability of main street businesses.

As the housing market continues to unravel, it could be a great benefit for consumers and their communities if HUD would consider developing a fair-trade rent-to-own agreement. Currently, too many of the rent-to-own agreements are as unscrupulous as subprime loans and of course these transactions are also not regulated.

I continue to wish on behalf of American homeowners for a more thoughtful approach to our housing/credit crisis.

Finally, an op-ed that describes the problems facing homeowners accurately. http://www.nytimes.com/2009/03/05/opinion/05geanokoplos.html?_r=3&scp=1&sq=matters%20of%20principal&st=cse

Unfortunately,the proposed foreclosure rescue plan is way off! Homeowners will have to help themselves by, documenting their situation, income, house value, mortgage purchasing process and answering their foreclosure at court with this information. Hopefully, judges will notice the trade patterns of lenders and lack of fair trade.

If homeowners cannot resolve their loan problems in the motions court, then should walk away from their mortgage.

It would be a difficult choice to walk away from your home. Remember home is your family, not the building! If the financial stress is hurting you and your family consider renting instead. Plan your exit strategy, then talk to your lender. Don't spend your precious resources satisfaying lenders to stay one more month in your house. Instead save your mortgage payments for a rent deposit, utility deposits, etc. Or negotiate with your lender to pay your moving expenses in exchange for the house keys.

FBI seeks to fast track some financial fraud cases, based on 29,000 consumer complaints and 2,500 cases. As a percentage of homeowners in distress or facing foreclosure this number of consumer complaints is small. In particular since community advocates had been highlighting predatory lending at least since 1995, about the same time that real estate appraisers complained about undue pressure to exaggerate home values. Maybe if the FBI advertised its mortgage fraud unit contact info it could have been different.

http://blogs.wsj.com/washwire/2009/03/25/fbi-to-fast-track-prosecutions-of-white-collar-crime/

The current direction reminds me of the great multi-state settlement with Ameriquest. Ameriquest accepted that it did conduct business in a predatory manner. The states settled for about $700 per homeowner. However, they “forgot” about the people facing foreclosure proceedings from Ameriquest. How do you explain to an elderly homeowner? “Yes, they took advantage of you and admitted doing so. But you are going to loose your home anyway. Here is your $700 find another place to live with it!”

Although we spent the summer of 2007 informing legislators (state and federal) and regulatory agencies about the lending practices of countrywide, there was little or no interest in doing anything about it. That summer J&D associates declared countrywide best lender of the year! Cheers! Countrywide we won’t forget you! You will right up there with AIG.

http://www.ameriquestmultistatesettlement.com/

If you are facing foreclosure or having difficulty keeping your mortgage payments current, then the best thing you can do is to take care of your health. The financial stress of trying to keep your home can be overwhelming. Is the financial stress making you unhealthy and affecting your family relationships? If you answered yes, then you need to plan an exit strategy. You want to avoid being caught with high health care costs and a ballooning mortgage payment and possible job loss due illness, it will simply not work out well.

You will need to find an approach that works for you, there is not a one-size fits all situation. Check Fannie Mae, HUD, and Freddie Mac, PHFA websites for info and access to certified help. Your personal plan should include saving money for rent, security and utility deposits and moving expenses, this is a must. Do not spend your savings for your exit strategy on anything! You want to avoid homelessness a very real prospect.

Think about moving closer to work to reduce transportation costs. Save money, reduce the time that you spend on the road, you could gain as much as six hours in a day. Focus on keeping your job and reducing your financial headaches. That may mean kissing your lenders goodbye! But the best way to leave them is by being prepared. Remember your home is your family not the building, why have your family pay for wall streets’ foolishness?

If we buy it with credit, then we don’t pay close attention to what we are buying. You think of it on a monthly basis. For entrepreneurs, why improve they will buy it anyway, because it easy on a monthly basis. For investors, short term pay off. Once all debt payments reach over 50% of your monthly income, well you are in trouble. So now we are in trouble and government is not negotiating on your behalf. It is trying to keep the financial system alive. There is a difference. But it would be nice if somewhere in those billions and trillions there were millions that help people re-settle so they don’t have to live in tents! Katrina all over again?