To stem foreclosures and keep people in their homes in a socialist mind set is not
enough, we need to have a free market based stimulus plan to get people to come back to
the real estate market to ensure on-going prosperity. Our country’s and hence the global
economic prosperity hinges on the continuing consumption power of the American citizens.
Nothing is more effective than to shore up the home value for every American to fix this
global economic problem.
While we still have time to do so, the new economic leadership we need now is not just a
socialist bailout mentality for people to get to survive but rather a committed mission
to help bring back the global economic prosperity. Over the long run, only free market
incentives could accomplish that prosperity goal. When this current opportunity is missed
and American citizens get into desperation next, the worst form of socialism may most
likely take hold of our entire free society at that time. Ask any older Chinese or
Russian citizens, they may be able to give you plenty of explanations on how that was
done in the past.
While creating housing demand through free market incentive plans is plausible,
continuing to be restricted to manipulation of interest rates alone to encourage more
leveraging will simply bring us back to where and how the current mortgage troubles
started. Therefore, further leveraging is not the way to stimulate the economy, either by
homeowners, consumers, banks, the Fed or the US Treasury. It would only lead us into an
eventual total destruction.
As explained on the www.SwapRent.com home page, playing tricks or keeping artificially
low interest rates temporarily to provide relief is a fictitious housing affordability.
True housing affordability could only be accomplished through shared appreciation/shared
equity economic concepts, just like investing in or owning any other assets that you
could not afford. To summarize in a simple sentence, true housing affordability simply
means “don’t bite more than you could chew”. To allow people who do not have the income
capability to use high leverage to get rich quick is exactly what caused our current
economic crisis in our economic society.
The problem with the conventional practice of shared appreciation concept in the past is
that the shared appreciation component was stuck in the Shared Appreciation Mortgages
(SAM) and often managed in a socialist way through using taxpayer’s money by
municipalities. They are neither quantifiable nor extractable and there is no easy way to
attract free market investment money from private sectors. SwapRent with its embedded
mortgages HELM was a new methodology specifically created so that the shared appreciation
components could be quantified, exacted and therefore it would become feasible to create
a secondary market of these new tradable shared appreciation contracts. Economic benefits
such as pricing transparency, maturity term flexibility, early termination reversibility
and capital regeneration, … etc. could therefore be easily achieved. Therefore the free
market based investors would feel confident and be interested in getting involved
From a macro-economic perspective of solving the crisis, consumption power via home
equity gains would be restored and revitalized through these housing purchase incentive
and economic stimulus plans by simply letting the future home equity gains go to those
who have the current economic income means to buy these future appreciation through
SwapRent contracts. Consumption power produced from the home equity gains by these
investors will create jobs, tax revenue for states and municipalities and it will
increase economic activities again. Those who did not have the economic income means
before will have the chance to work to create the income capability. They can then save
and invest in future home equity gains again similarly through these same SwapRent
contracts. All these investment activities should be done within their economic income
capability and without any unscrupulous abuse of high leverage again.
From doing social good’s perspective, all the low income homeowners could get to continue
to occupy and enjoy the comfort of their homes through this new “economic renting”
concept via the use of the SwapRent contracts while the investment activities could go on
with or without these homeowners because of the separation of legal and economic
ownership inherent in the SwapRent concept.
Once these shared appreciation/shared equity concepts through SwapRent contracts have
become well accepted practices in the future, there won’t be any chances for
leverage-created asset bubbles any more since asset growth will become more legitimate
and healthier by only letting those who have the money to invest without the use of high
leverage. In another word, more rational low leverage investment to foster steady asset
growth and create wealth could be accomplished easily through introducing this new
SwapRent based reversible and tradable appreciation sharing concept.