The housing market crisis (collapse):-4

So my recommendation for the correction of the housing market and avoiding the next housing bubble will be as follows:

1.Have a minimum of 10 percent down payment for all federally backed loans and for Jumbo loans at least 20 percent down payment.

2. Have funds in the account equal to at least one (1) year of the mortgages payment for the federally backed loans and at least two(2) for the Jumbo loans.

3. Have complete documentation of all the funds they have and expenses they have occur for the last three years for the federally backed loans and for the last five years for the Jumbo loans.

4. Put a Ban on the exotic mortgages that have plagued the system like the one mentioned in my previous posts (LIAR, NINJA, interest payment only, adjustable rate optional interest rates etc)

5. Stick with the conventional 30 years and 15 years mortgages and only the adjustable rate mortgages with the same requirement of the down payments and documentation requirements (as mentioned above).
6. Credit Scores of at least 700 should be the criteria for the federally backed loans and at least 730 for the Jumbo Loans.

7. Borrowers should be asked to furnish the health of their finances every year for the federally backed loans and every six months for the Jumbo loans.

Although the above mentioned list is not all exhaustive but it can be start. Although I am absolutely positively 100 percent people will state that it is draconian but if people have vested interest in their houses they will be prudent enough to think twice before leaving defaulting on the payments even if it is not their fault.

These criteria can be modified for different borrowers. But the lenders should not be absolved from their responsibilities either. They should have the following rules to follows: (although it should be up to them if they mess things up):

1. They should make every due diligence effort to make sure that they are lending according to the above rules and following proper procedures.

2. There should be a requirement that every lender should have a dedicated 1-800 toll free numbers just to be dedicated to the problems of the mortgage holders (although I believe it is now also) like if they are going to fall behind on their payments or they are financially strapped to call the bank to let them know how to avoid falling behind.

3. The banks should on their part also require that the borrower should furnish every year their financial cushion for the mortgages payments for the federally backed loans and every six months for the Jumbo Loans.

4. They should be required to explain in plain layman terms what the borrower is signing and how much they should be expected to pay (although it is still done but I guess it is getting lost in the communication) in closing and monthly payments and should be given ample time (not more than 7 days) to examine if they should go ahead and sign on to the terms.

Again I am certain that not all the above rules will be followed since the excitement of owning your own place (Borrower) and making commission on it (lender) will be too much but at least if followed there will be less lawsuit claiming fraud. Thus the onus or burden of dealing with the house and mortgages will lie with both of the borrower and seller.