The Trump Blog

The Trump Blog

Ideas and Opinions from Donald Trump and TrumpU Faculty.

Answering Bernanke's call for 'forgiveness' from Bankers...

Blog Image

A recent speech by Fed. Chairman Ben Bernanke directed bankers to be proactive in their search for solutions to help consumers save their homes from foreclosure...even if it means a reduction of principal and taking a loss. While we all agree that something has to be done to slow the sharply increasing starts of foreclosures in America, asking banks to foot the entire bill doesn’t seem like a feasible solution in and of itself. 

Reduction of “principal” for homeowners so they may sell their homes at a lower price than what they owe is precisely what will cause home prices to continue to fall and our neighborhoods to continue to fragment.   The largest reason why foreclosures are up so drastically nationwide is due to a real estate market which has heavily depended on at worst, a slow and steady appreciation in prices. 

Since 2005, many parts of the country have seen just the opposite and are at double digit market depreciation of housing prices. For that reason, I think allowing more people to discount their homes so they can “escape” their mortgage would exacerbate things further. We would see a larger inventory supply of homes and with less demand due to the tightening of underwriting guidelines for mortgages.

Part of the solution needs to come from lenders finding creative ways to keep their customers in their homes thus maintaining more stability in our nation’s neighborhoods. Maybe it means they have to modify some of the notes on their books by allowing those people with ARM’s, Subprime, or even A-paper loans who are in trouble to restructure their mortgages in order to stay put. Part of the qualification for doing so could be some form of lender paid “consumer counseling” classes requiring completion. 

This solution is going to have to be a collaborative effort on the parts of all parties involved and can’t be the result of the banks just giving in. What are your thoughts on these recent comments by Chairman Brenanke and what do you think can be done to deal with these issues.

Michael Sexton is President of Trump University.

Permalink |  Email this |  Add to Del.icio.us  Digg it!  Add to reddit  Add Newsvine  Add to Technorati  Add to FURL

7 Comments   Post a comment

[-] Posted by William Yang on 03/11/2008 10:27 AM
Nothing to forgive. it's all our fault. we're the one who overspending, and we chose someone who can give us an instant comfort in the shortest time.

Anyway, even we have someone to blame, it'll not change anything.

it's not time to blame anybody, it's time to restructure ourself, try to renegotiate the deal, find extra income, and life must goes on. even
[-] Posted by LesRmore on 03/11/2008 11:37 AM
I think the banks should look into structuring something like timeshares. You pay a certain amount into the pool for the right to use a property to for a certain amount of time. Suppose you're a young couple building a family. For the next 5 years you want to live in a 3 bedroom 1.5 bath home in Duluth, after that you decide you want to live in a 4 bedroom 2 bath home until the kids graduate. After that you want to live in a 2 bedroom home in a warmer climate for the next 15 years. There would be a pool of houses available and you stay within your budget, the bank or some other entity owns the houses. There's plenty of stock out there and those who own shares can sell them or use them towards buying any of the houses. Legislation would have to be passed to allow for timeshare owners to write off a certain amount of interest just like with a conventional loan...but Congress needs to pitch in and do something here too.
[-] Posted by Sharky on 03/11/2008 2:08 PM
The market should be allowed to correct itself. Period.

People forgot the lessons of the Great Depression within two generations and thus, we are (many so over) due for another reminder. Sadly though, this time around we have a much larger, more foreign and subsequently less cohesive population in addition to an enemy that has pretty much supplanted our industrial capacity to fight a war out of this one.

BTW, I love the term 'forgiveness.' That would almost be funny except that it is supposed to be taken seriously as if we were all so blind or stupid.
[-] Posted by member1697219 on 03/11/2008 7:46 PM
It's a combination of all these factors

Unscrupulous lending being the primary driver behind the foreclosure mess.



http://SDI.Financial.officelive.com
[-] Posted by Dan Kolich on 03/11/2008 9:58 PM
I believe the problem is not only banks but our own. We are becomming a service economy.manufacturing done elsewhere due to lower costs.look at steel.look at automobiles. How do you put growth in a service economy? There's no base support to feed the market. Government can provide some jobs but we pay the governent through taxation. This combined with banks and pseudo lenders charging extreme interest rates make it difficult for people to make payments, yet if they don't pay these rates loans don't happen. Then should the economy turn for the worst, people lose jobs, higher gasoline and oil prices, higher utilities in general, then people have little choice. Defaults onloans, bankruptcies, etc. Most people didn't grow up with financlal advisors in their families. Now banks are having to call in their chips. How much interest does one have to make to be considered a successful investment? Can't a bank make a 5% profit and be sucessfull. Think about it this way....if you have lower interest rates you have a larger base of clientelle to work. If you charge extreme rates you eliminate a whole class of people and put yourself in jeopardy of exacctly what's happening now...foreclosures and bankruptcies.. I believe there are too many groups out there lending money.
[-] Posted by Business 2000 Foundation on 03/13/2008 4:45 PM
We are not sure on forgiving the debt. We would seek assistance to lock in a favorable loan interest rate and re-structure lending payment.

The Fed. Reserve should of maintained more strict guildlines to the lending banks. The housing industry was way to slow in offering to help re-structure fair deals to consumers. Over-priced the value by simply adjusting the loan rates and lock them in with the lenders. The Fed Reserve, in our view, was way to late to adjust and lock in fair rates to the lenders to help curb the forclosures. To oversee the problem and to correct the problem by making very simple adjustments. They all saw it comming and done nothing.
[-] Posted by member1760769 on 03/19/2008 10:35 PM
Outstanding articles written by Brett. He has great insite to the real estate market and has enlightened me in many ways. Thanks Brett for GREAT information and tips in the real estate market. The articles are written wonderfully.
CJ in Texas
Get the Feed
AddThis Feed Button

Please send me Trump University's weekly e-newsletter Inside Trump Tower and let me know about special offers.


See how you stack up against Donald Trump take our FREE entrepreneurship test.

Blog Roll

Trump's Official Apprentice Blog

Trump U's Marketing Blog

Common Sense Guy

Seth Godin's Blog

How to Change the World

Tom Peters

Pogue's Posts

Beyond Branding

Freakonomics

Marketing Excellence Blog

Clear Blogging

Rajesh Shakya

 

TrumpU Books

Trump Wealth Building 101 Trump University Wealth Building 101 Your First 90 Days on the Path to Prosperity

Trump 101 Trump 101 Author: Donald Trump Publisher: Wiley

Trump Marketing 101 Trump University Marketing 101 How to Use the Most Powerful Ideas in Marketing to Get More Customers

Trump Real Estate 101 Trump University Real Estate 101 Building Wealth with Real Estate Investments

Trump Entrepreneurship 101 Trump University Entrepreneurship 101 How to Turn Your Idea into a Money Machine

Trump Asset Protection 101 Trump University Asset Protection 101 Tax and Legal Strategies of the Rich