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Editor’s Note: The following Guest Commentary was written exclusively for FlippingFrenzy.com by Larry Rubinoff, branch manager of a Clearwater Beach, Florida office of Mortgage Lending Direct, a dba of MLD Mortgage, Inc. Larry’s commentary is his and his alone and does not necessarily reflect the views or opinions of the management of FlippingFrenzy.com. You can read Larry’s thoughts here on FlippingFrenzy.com most weekends.
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Last weekend–in my guest blog entry here on Flipping Frenzy titled “Taking the Foreclosure Crisis Personally,” I posed the following question:

Would it not be better to freeze a [interest] rate for a homeowner who has been paying at that rate rather than foreclosing and kicking the person (and his or her family) out on the streets? In the extreme, would it not be better to cut the rate in half rather than foreclose

Now, U.S. House of Representatives member Barney Frank (Massachusetts) has outlined a $15 billion plan to buy distressed mortgages from lenders, saying the “cascade of foreclosures will continue” without government action. Frank, who chairs the House Financial Services Committee, is also said to be working on another plan to provide as much as $20 billion in loans and grants to purchase foreclosed and abandoned homes at or below market value to stabilize home prices.

While I do not agree with some of his proposals, I do agree with this (courtesy of National Mortgage News Online:

Under Rep. Frank’s plan, the existing holder of a mortgage would be required to write down the loan to a level the homeowner could afford. The write down requirement would not apply to investor-owned and second homes.

Just as I was saying last week, let the banks and lenders take action on their own, give back some of the windfall profits they made, reduce the rate of foreclosures, and allow more people to keep their homes. Logically, what choice do they have? Kicking people out of their homes and writing off the debt is not a sustainable strategy. Keeping performing loans on the books and maintaining property values makes a heck of a lot more sense.

Win-win versus Lose-lose; that the decision we’re faced with. And with an estimated 1.8 million new foreclosures projected for 2008, what are government and the private sector waiting for?

With a recession looming (I believe it’s already here but the so-called “experts” say it’s too soon to tell), the dollar weakening in world markets, and inflation threatening the basic survival of the average American family, I say corporate American needs to actively participate in the downturn as much as it did in the upturn.

If the lenders/mortgage note holders want to offer solutions to borrowers, they can. To Bank of America–which itself is facing billions of dollars in loses to foreclosure–and to the other financial services organizations that members of Congress (like Barney Frank) have been talking to about the crisis, why must it take an act of Congress for you to make such an easy decision? Each and every day you wait, thousands of people lose their homes and face the prospect of a very uncertain future.

What solutions do you–the readers of Flipping Frenzy–have? Maybe we can compile them in the Comments area of this blog entry and send them to Rep. Frank!