Market review of today's activity.

We did manage to go back above 7,800 on the Dow today, closing at 7,837 while the S&P 500 closed at 825. The VIX Index closed at 38.85 and the Put to Call ratio closed at 0.86. If we can make it through tomorrow above the 7,800 level it would be good as we have a 3 day weekend. Markets are closed al day Friday.

So here we are holding again and extending the time at this level. What does it mean? To me it means many don't want the market to go lower and the shorts are afraid it can go up quickly so they also are cautious. So we have a standoff right now and a tight range at the bottom of the 7,800 to 9,300 range or at the top of the 6,400 to 7,800 level depending on which way you think we are headed.

Unemployment makes this a horrible recession but the leading story in our local San Francisco paper this morning was all the homes the Banks are just keeping that have been foreclosed, rather than putting them on the market and selling them. Obviously they are hoping for better days ahead or they would be selling them. Many take this as a bad sign about the problem with the Banks. I take this as a good sign that the banks actually can see some recovery going forward. You choose what you want to believe. The more disturbing news today was brought to me by a neighbor who told me that many loans for properties are not going through approval. He quoted me that out of about 40 mortgages applications, only one is getting through and approved. He should know as he is in the business. Let's hope this frees up soon.

Helping to reduce foreclosures is possible with compromise by all affected parties.

I have been giving some thought recently about what to do about those who had sub prime mortgages and find themselves facing foreclosure. The object being how to do the best to keep the most number of people in their homes and the fewest foreclosures, all this without having to lower the value of the home. It is a monumental task indeed, but it is a huge problem facing the very survival of our economy and financial institutions.

So I have made some assumptions necessary for the solution to be acceptable to all those involved, including the Homeowner. Here are the assumptions I made:

• The mortgage amount of the loan stays intact at what the purchaser borrowed.
• The length of the loan terms would be extended to the maximum.
• The originator of the loan must only repackage the loan and sell it either to Freddie Mac or Fannie Mae and would be owned by the Government similar to FHA loans.
• The percentage interest of the loan would be set the lowest interest rate from the past 25 years.
• The owners must be occupants of the homes. No subletting or renting allowed.
• Down payments on these homes were 15% on average.
• The length of the loan terms will be extended to 50 years from the current 30 years.
• Medium Home prices by region are assumed to be as follows:
West $253,600
Northeast $246,800
Midwest $152,500
South $167,200. All these figures were as of Nov. 4, 2008 and can be checked here.

So if one assumes thew average price of a home to be $200,000 for loan calculations and that no principal has been paid on these loans, then various monthly payments can be calculated.

Here are some possible mortgage payments:

This would compare to 6.5% for 30 year current mortgages for a loan of $200,000-$30,000 (15% down payment) or $170,000 mortgage of a monthly payment of $1,074.52

With these sub prime loans set to 4.3% for 50 year mortgages for a loan $170,000 mortgage of a monthly payment of $ 689.83.

When I look at these numbers it would make a significant difference to a home owner facing foreclosure, because it is a reduction of $384.69/month in the payments or a 35.8% reduction in monthly payments. I picked the 4.3% interest rate because back in the mid 90's banks had interest rates that low on mortgages. This reduction could make all the difference in the world, to a struggling homeowner and their family.

I know the homeowners will never pay off their homes here, but if they can still occupy them, and, given time, with house appreciation, they could sell their homes for some money back some day. Besides, how many of us really pay off our mortgage before we are ready to sell and move to another home? Not many I assure you. At least this is a solution. You have any better ideas? I am open to hear them.