I stumbled on an interesting article today about a new type of loan modification program that has potential to save the economy.  Past loan modifications have only left us worse of and now banks are suing banks and the government is handing out money to corporations and now the people are standing up and fighting back, and with a brilliant solution at that.

The idea is for a new loan program that instead of the government to lend out millions of dollars to banks, the banks will just reduce the amount of principal on loans.  The statistics are as follows:

“If lenders would reduce all underwater mortgages to their current market value, the nation’s banks could pump $71 billion per year into the economy, create more than 1 million jobs annually and save families up to $6,500 per year on mortgage payments, according to The New Bottom Line, a collaborative of 1,000 faith-based and community organizations who want Wall Street held accountable for the mess it created.”  -Ann Brenoff, AOLreal estate

The idea behind this is that by reducing people’s loan payment, it allows them to spend their money on other things such as groceries, clothes, etc.  This would cause a spike in consumer demand and businesses would be doing better and lead to prosperity and jobs.

Tell me what you think, could this idea help revive the economy?

 Bill Allen is a Realtor in Boulder and works at Remax of Boulder