A Solution to Foreclosures

Slide 1: Solving the Foreclosure Crisis An interesting and responsible approach to strengthen our economy

Slide 2: Solution Overview • No bailout • Encourages people to help themselves • Creates incentives that steer people in responsible directions • Promotes and rewards consumer education • Gives financial institutions, government, and consumers a role in the solution

Slide 3: Help Borrowers Pending Foreclosure Today • Tax-free second job to help afford payments – Those in foreclosure process can get 1-year tax exemption for a second job to help them with payments – Foreclosure process stalled as long as they gain ground on what they owe • Must enroll in and pass financial education class made available for free through institution that approved the loan • Second job/enrollment in class qualifies borrower for term/rate adjustment through Fannie – Single parents qualify for second job exemption

Slide 4: Help Borrowers Save for Proper Down-payment Today • Create 529-like tax-free account for people to save for down-payment – Must be for primary residence – Any amount put into account is tax free – Person contributing money toward account gets benefit • Start education campaign for bank customers – People who complete an approved financial education course receive better LTV or some other discount on home loan (like insurance discount for completing defensive driver course)

Slide 5: Good for Banks • Helps to avoid foreclosure • Good PR in helping consumers • Education program can market more products to people • 529-mortgage account encourages home loans

Slide 6: Good for Borrower • Emerges from the process smarter and empowered to make better decisions • Can take pride in the fact that they saved their home and did it through their own hard work • Avoids foreclosure, which sidesteps disruption of lifestyle • More likely to have sizeable down-payment

Slide 7: Good for Government • Strengthens economy by encouraging people and banks to solve this problem • Uses tax incentives in a way that steers toward people responsible behavior • Helps the lowest income families the most • No bailout