Since the collapse of the subprime mortgage, economies around the world await the actions to be taken by the U.S. In an attempt to meet the basic right to shelter, the US tried to deregulate some institutions to make housing accessible to all. In hindsight, this brought along with it gamblers of all sorts that eventually toppled the industry. My humble suggestion to avoid such a fiasco again and to give each American a place to call their own, here is a system that has actually worked in the Philippines.
1. Create an agency that will oversee the housing and development sector. This agency will also be responsible of collecting contributions of members. These members are the employed and self-employed. Contributions will depend on the income they make per month. After 30 months of contributions, the member may now avail of a housing loan. The size of the loan will be based on their monthly income. In cases wherein both husband and wife are members, their loan will be based on the combined monthly income. Their 30-month contribution will be used for emergency payments should they suddenly lose their job.
2. This agency will also ask real estate developers to bid on housing developments. They should have different categories of housing that will meet the demands of the members. This would ensure that members will not be getting homes that they could not pay.
3. Bank and other financial institutions can be tapped for financing but interests must be regulated to control the prices. This will stop runaway interests rates that could end up in foreclosures.
This may sound tedious but the mortgage industry will be shielded from unscrupulous practices. Homeowners will also be secured and would not default in their payments. If only the right form of capitalism was employed, America would not be in this mess now. The dark side of capitalism is that when unchecked, greed sets in and the entire system breaks down. Now, it is the ordinary taxpayer who must step up and be patriotic(?) to save a sinking economy. The bailout bill is good in some ways but it must be transparent. Oversight is paramount to ensure that the people will not be duped again by the government.
September 27th, 2008 at 2:46 am
Very interesting plan, and you say it worked well in the Philippines as well?
hmm, I don’t think a lot of Americans fully understand the implications and consequences of the subprime mortgage collapse, and they also don’t realize how open they leave themselves (myself included) to these things happening again and again.
I agree, go with the safe decision, even if it is tedious.
October 1st, 2008 at 6:18 pm
Do you really think the world is waiting for the USA to take a decision?
In Europe measure have been taken to guarantee economicstability as far as possible. That’s why the stockmarkets were rising again.
The confdence of the public prevents stupid actions like taking money out of the banks.
Maybe it’s time the USA took some real interest in how other countries deal with the mortgage industry, deal with loans, and also deal with national solidarity in crisis like these.
Education of the population is very important.
The ideas you give here are already in use here.
No income, no mortgage. Low income, low mortgage, very high income, no mortgage.
October 2nd, 2008 at 4:29 pm
What an interesting idea. It sounds like a solid idea. The only problem is that it would be a government agency correct? And those are often not the most efficient entities on the planet.
October 11th, 2008 at 3:53 am
The system you write about sounds similar to the credit unions we have in the UK. They do work really well, in fact I saw an economist on tv saying they were a much safer place to put savings and get loans than the banks.
October 14th, 2008 at 1:49 pm
which one are you referring to that worked in the phils?