Saturday, February 25, 2012

Student Debt and the Purchase of a Home

Student Loans Near $1 Trillion Hurt Young U.S. Buyers: Mortgages

An idea I had when running for NJ State Assembly was to help  graduates carrying college debt and help them purchase a foreclosed home. It would help or eliminate the student loan, generate tax revenue, reduce the glut of foreclosures, and help stabilize the prices of existing homes.

As an example, if a foreclosed home that was worth $450000 is now valued at $200,000 and a college grad has a debt of $100,000, perhaps combining the two into a $300,000 mortgage. Most banks would look at the student debt as an obligation against qualifying for a mortgage loan. But the student could only qualify for a foreclosed home, not a new home or typical mortgage. This would possibly help eliminate empty homes in foreclosure, help stabilize home prices and give a graduate the opportunity to own a home. By this method they would be able to pay down both loans at the same time.

By the time many students pay off their loan and qualify for a home, their kids would be going to college.

If the student defaults on the mortgage it does not eliminate their student debt. Perhaps it could be set up where a percentage of the mortgage goes toward the principle of the student’s debt. Another  possible option would be able to pay off the $100,000 student loan and carry a $300,000 mortgage.

If the college graduate can show some kind of collateral or promise or a job in a certain a doctor, a lawyer, engineer, etc. .....a certain income level, it would be much better to have a family in the house than for it to stay empty in the foreclosure process.

They would not be entitled to any discounts or incentives, and still have to meet the same requirements any other homebuyer would qualify under. There would be no student loan debt forgiveness.

I have heard that some banks are thinking of selling their foreclosures to investors who would rent them out. That would hurt neighborhoods substantially, as the investors really don’t care about the neighborhoods and are only looking to receive a monthly income. Perhaps an idea like this would help prevent that from happening.

Countless foreclosed homes are being stripped of their copper pipes etc. while they sit empty, or taken over by those that don’t belong there. Numerous homes are bought by investors who live out of the state and rented out, and as long as the rent is paid they investors don’t really care who lives in them. Perhaps this could be a win-win for everyone. Many banks do not want to keep the growing list of foreclosures and are thinking of selling them off to investors who have no interest in the neighborhood other than monetary gain.

This may not be a perfect plan, but I haven’t seen any other solutions or ideas. This could be a starting point to help resolve the foreclosure and student debt issue.

No comments: