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If you think that the problems that we are having caused by smug all knowing arrogant idiots are new, check this

Fed Caused Great Depression And some commentary

They have been wrong, they are wrong, and they will be wrong

And also Stupid

Where we might be headed

PATENT PENDING

Process for making small residential units easier and less expensive to own and transfer, thus ameliorating the current mortgage mortgage / foreclosure crisis and reduce risks using a form of transferable mortgage

This is a new way of buying, owning, transferring and residing in personal residential real estate. It relies on existing methods, some slightly modified, and arranged in a new way. This Patent restores the concept of home ownership to its original form of being almost entirely for the purpose of acquiring a place to live, and removes it as a form of short term investment or as a source of day to day money via Home Equity Lines of Credit (HELOCS). It also removes much of the element of financial risk, and many of the tax problems and and necessary tricks that arise when a person sells a house and moves to a new home.

My new way of real estate ownership, which I call RE-new can be accomplished either by private parties operating under existing law, or by changing the law to accommodate the new concepts, or by some combination of both methods. In either case, it will have to start out as private parties using my method.

To start with, remember that property ownership is an abstraction set into law defining rights and responsibilities among the parties. Those rights and responsibilities are whatever the relevant laws and contracts say that they are.

It is clearly impossible to describe all the ways that contractual agreements can be created to arrive at a given goal that is mutually agreed upon by the contracting parties. This patent covers the use of four items together to define a new way of owning and using property. Each of them has been used separately over the past 30+ years, perhaps under different names. It is the combination of the four of them into one unified method that makes this process unique.

There are four key parts to my method. Much of my patent relies upon private parties making contracts. This patent suggests how some parameters be set for those contracts. Should a contract be created that does not abide by those suggestions, that does not necessarily mean that this patent does not apply to the business practices engaged in by the contracting parties.

Part I. The Normalized Housing Unit.

There now exist futures contracts in housing. That is to say, that just as one can own rights to gold, or rights to oil via commodities markets, one can own rights to houses without actually owning a house. Unfortunately these contracts are out of the range of the average homeowner, let along the average person. The first part of my method is what I call a Normalized Housing Unit or an NHU. Its size will be some unit of area. Examples used in this application will use a size of one square foot, and will have a price as determined by the appropriate market, and will be available in either of three forms, national, regional or state. A contract for a NHU will specify what type it is, and when specifying a region, will describe the region which could be as large as several states, or as small as a zip code. NHU's will be fiduciary instruments like futures contracts. It is my recommendation that a federal law should be enacted that so that NHU's used to purchase property must be owned in their entirety. That is they will not be allowed to be leveraged or borrowed against. Until and unless such a law is passed, they will instruments issued by the PRP's, and by contract the total number of such instruments issued will match area of residential properties owned by a PRP (See II below). With regard to leverage, they may fall under the rules of stocks, where they can only be leveraged at 50%. The value of NHU's will be determined by how they trade on a commodities exchange or, if that is not available, by professional appraisals or some other agreeable method.

A contract between a owner and a PRP to occupy a house using NHUs should require that there be a mix of the three types of NHUs with the following suggested constrictions. At least 1/3 of the NHUs should be national, and no more than 40% should be regional. This will have the affect of minimizing the fluctuations of the “value” of a persons housing equity. As will be seen below, this equity is portable, and can not be obliterated by a decrease in house values.

The NHU, along with supplemental contracts for specific homes will replace the mortgage. This is spelled out below. A NHU has some of the properties of fractional real estate ownership

Part II. Pools of Real Properties or PRPs.

There will exist umbrella organizations that could be corporations or CO-OPs or non profits or something similar. The purpose of this umbrella organization is to acquire what I call a Pool or Real Properties and be responsible for them. Instead of a mortgage tied to a specific property that is owned by a specific legal person and a title to that property owned by the person, ownership will be split into two complementary parts belonging to two different entities. The two entities shall be the Umbrella Organization (UO) and the owner/user or owner/landlord . The UO will be simply a corporate entity that holds title to and globally manages a number of residential properties the PRP. The stock holders shall be, primarily, the owners of houses acquired with NHU's and other UO's. UO's will arrange for annual inspections of properties and for routine maintenance of such things as Pool Pumps, HVAC, septic tanks, Roofs, etc on those properties that are part of the PRP. UO's will share in the change of properties value with owners of properties, thus distributing and reducing short term risk, while allowing individuals to participate in the long term global appreciation of real estate.

Part III. A new form of title.

Title shall consist of a private form of Torrens title along with appropriate real covenants. As long as a given property stays with a given PRP, there will be no need for title searches, or title transfers. The specific rights and responsibilities that one normally thinks of as ownership, shall be spelled out in contracts between individuals who wish to 'own' the property, and a UO that controls the PRP. Covenants on the title will prohibit any PRP from placing any encumbrance upon such a property, or selling such a property without the explicit written consent of the owner.

If a person / owner needs to “encumber” some of their property, they may do so by moving some of their wholly owned NHUs back into the pool on which they are paying the mortgage.

Part IV A different form of mortgage.

The new form of mortgage will not be on the property, but rather on the NHU's required to be the equivalent in area of the home in which the mortgage payer will reside. As the mortgage is paid off, it will be by paying off and acquiring fully paid off NHU's so that the number of NHU's in the mortgage goes down, and they are all, essentially, leveraged near 100% This makes it easier to to make mortgages portable. See below. Since the mortgage is on financial instruments, (NHUs) it is easy to pick them up and move them to a new property when a person wishes to change his residence or vacation home.

Additional terms Unless otherwise stated, an Owner will be an individual using NHU's to reside in a property to which a PRP has conventional title. A PRP will be called a corporate owner.

Suggested Ideas for How The New System Works

People will be able to acquire Normalized Housing Units (NHUs) The NHU's will be able to be used to acquire and use living space in any house in a Pool of Real Property (PRP) in accordance with the rules and regulations of that Umbrella Organization (UO) that owns the PRP. How each UO structures its rules, and the relationships with other UO's will be up that Umbrella Organization. It will work like this.

A UO will manage its properties for the benefit of those who own them, and for the corporate stock holders. Each house will have associated with it shares of the particular UO to which it belongs. The owner of the house will also be a stock holder of UO that manages the PRP. The shares and ownership will be structured in such a way that home owners will own a minimum of at least 25% of the UO. Of course, the owners could own as much as all of the PRP.

There will be a minimum of how many NHU's a person needs to own in order to occupy a home in a PRP as an owner. The resident owner will then acquire a “mortgage” on the number of remaining NHU's that would be required to own the given house in full. This new mortgage will have some of the properties of a futures contract. That is, it will be an agreement to purchase a set number of NHU's for a fixed price. When a person buys a property in a PRP, his equity will increase as he acquires fully paid off NHU's NHU's can decrease in value, but because there is no leverage involved the decrease and increase is, essentially just at face value.

In addition there will be other costs that are associated with owning a house such as insurance and maintenance. Because of the size of the PRP it will be able to benefit from systematic scheduled maintenance and large scale purchasing of supplies and contracting.

The UO maintains a pool of approximately 10% of its PRP to be used for vacation homes or as rentals at below market rates, and possibly an additional second tier of reduced cost properties. This is how a reduced cost property functions. Some people are not that fussy about their residence. One home is pretty much like another. Other people want things just so. They simply must have more rooms rather than larger rooms or visa versa. Or they must have tile rather than carpet.

So, if you are willing to be a second tier owner, you can get a break on your costs by being willing to change homes with 60 days notice, or some other number determined by contract. Moving expenses will be paid for by some combination of the PRP and the party acquiring your home. You will not be expected to move more often than once ever (to be contractually determined)

If a person still can not find a suitable home in a PRP, then they can work with the UO to acquire or build a home and place it into the PRP and then make that their residence.

The greatest benefits for owners in this system are as follows:

1. Minimized leverage of ownership. Thus a homeowners equity is protected. If they wish to have a leveraged investment, in housing then they can purchase NHU's on the commodities exchange, or housing options.

2. If they need to move, they do not have to refinance. They simply take their NHU's at their current face value and go to a new house. They keep paying the mortgage on the NHU's they had promised to buy, and those NHU's move from the mortgage column to the paid column. If the value of the new home is different from that of the old home, than a cash settlement can be made for the difference, or the number of mortgage payments remaining can be adjusted, or other financial arrangements can be made. See attached for samples.

3. Buying and selling costs are reduced. A nominal fee of maybe one percent is paid to do all the paper work, inspect and appraise the houses, and whatever else is deemed necessary. The owner moves out of house ONE which reverts to the PRP, and moves to house TWO. House TWO would be part of the rental or vacation home pool or inhabited by a second tier owner who would then move out. If the owner can not find a home to his liking, he will have the option of buying another home into the PRP, or of simply leaving the PRP pool as per contractual agreement.

4. Known costs for high value items requiring repair and maintenance as well as reduced costs for insurance and distributed over time. Because a UO will be managing several hundreds of not thousands of units, they can arrange for scheduled inspections and routine maintenance and even replacement of high value items with known lifetimes. Because of economies of scale the costs associated with these necessary functions will be less when compared to those costs for current private home owners.

5. They can also self insure. To encourage due care on the part of an owner, if a covered item fails after an owner has been at a property for six months, he will have to pay 10% of the cost of repair or replacement.

6. In these times of financial crisis, the greatest benefit is this one. Suppose that a person suffers a financial reversal, and the value of their home has gone down. As long as they have some reasonable income, this is not a problem. The person simply moves to a smaller house, one that they can afford. Remember that the NHU's have not lost all their value, just gone down in value. But if they had 400 sq ft, of NHU and are in a 2000 sq foot home, they can move into a 1200 sq foot home and have a 33% ownership value, and start paying rent plus on the remaining 800 sq ft, Their payments will have gone down by ½ but their living space will only have gone down by 40%

Many people have lost hard earned down payments in the tens of thousands of dollars when they lost their homes to foreclosures. Others are about to loose those down payments. We are not addressing those who refinanced their homes, or purchased them with zero down. In order to give these victims of Wall Street incompetence the advantages of this system, new UO's (Umbrella Organizations) will be encouraged to share the leveraged appreciation of the properties that they buy with those who have been the victims of foreclosure, or are about to loose their homes to foreclosures. The purpose of this is to allow hard working families to regain lost investments. Banks will also be encouraged to offer better terms in such situations.

This saving the American Dream (STAD) program will benefit all concerned. An example is included

**********End of Provisional application for a Patent**********

Additional Notes

Sharia Law

This system can easily be made to conform to Sharia Law. That is, as far as the home owner is concerned there is no paying of interest on money that is lent. This is because NHU's are wholly owned. Rent is paid on that part of the house that is not owned. I am sure that the advantages of this are obvious.

Reducing Costs to the Economy

I n this article in “The Atlantic” on page 6 is the following statement: “The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.” But my system breaks the ties. “Owners” can move almost as easily as renters to locations where there is a better fit between their talents and a particular geographic area. See also this two page article in The Atlantic

Monetizing MBSes (Mortgage backed securities)

A financial institution takes the properties that they have taken back after foreclosing on them. Then they create NHU's based only on the average value of properties in a region in which a property exists. The NHU's will be discounted based on the degree of property deterioration of foreclosed properties. The key here is that whereas at one point there existed securities that were backed up by mortgages that had been sliced and diced, and because of the current situation the mortgages could really no longer be evaluated, and so the securities could not be evaluated, now we have securities made of pieces of paper (POPs) that each reflect several fractions of different houses of known square footage. Now it is easy to evaluate the total square footage represented by a POP that used to be a MBS. This total Square footage can now be evaluated via the NHU's What was once a MBS of dubious value is not a contract for a commodity that can be, relatively easily, traded.

People with poor credit and little equity can move into a house and quickly change sweat for NHU's while paying to acquire NHU's

For example consider a package of MBS. Bank forecloses. The underlying mortgage becomes worthless. This lower values of all other MBSes. Bank now has a property on its hands that starts to deteriorate by the day. How are the underlying MBS's to be valued? Assume that the bank has 10,000 homes at say 150,000 each. Why 150,000? No one knows. No one knows the value of the homes. But at an average of 2000 sq feet each, we know that the bank does have 20 million square feet of housing, and that these could be used to create 20 million Normalized Housing Units. If the bank were to give the 10,000 homeowners who had lost their homes 100 NHU's each for a value of say $1.00 then the bank would get a lot of good publicity. But now you have an instant market. You have a million NHU's on the market with people anxious to sell. Bargain hunters will be looking to buy cheap and sell for a higher price. After a week of trading, you probably have a fairly good idea as to what the rest of the 19 million NHU's are worth. Thus you have an idea of what the MBS's are worth.

And yes, I am aware that new laws wmay have be created to make this legal. In the meantime I suspect that some lawyer somewhere will be able to interpret existing laws in such a way as to make this legal. And since everyone benefits, it should work. Should anybody point out how “I do not know what I am doing”, well I would ask, where is your evidence that anyone on Wall Street of in DC knows more about what they are doing than I do? The ideas in this paper have the advantage of being fairly straightforward and grounded in reality as we know it

Politicians Care? Yeah, right.

At least two politicians had full access to this information back in October, and neither thought it was worthwhile. Either they did not understand it, or they did not see how it was helpful to themselves. Other politicians know about it, but also have shown no interest. If you want to get our country fixed, and think that this is a way to do it, you had best not expect any help from those who brought you the current mess. Lest you wonder who those are, it is most of the “experts” with “experience” within 50 miles of either NYC or Washington DC. So, it is up to you. contact me here Spread the word. Make noise.