By Ilyce R. Glink with Samuel J. Tamkin
Saturday, November 15, 2008

My mailbox has been filled with letters from readers who wonder if the real estate market will reset itself now that the presidential election is over.

"Can we expect the next four years to bring us a better real estate market? Will my house go back up in value?" one reader wrote.

Eventually, the real estate market will hit bottom and turn around. Perhaps it already has (one can only hope) and now we are waiting for the "bumpy bottom," as Alex Perriello, president and chief executive of the Realogy Franchise Group, put it at the launch of its newest franchise, Better Homes and Gardens Real Estate.

But as President-elect Barack Obama said in his election night speech, there is a lot of work to be done, and not just by bureaucrats in Washington. Fixing the economy will be a responsibility shared by corporate America, the federal and state governments, and U.S. residents.

While there's no magic bullet, there are many suggestions floating around about how to help the real estate market get moving again. Here are some of mine:

· Keep people employed. People who don't have jobs can't pay bills. If you want to hold down mortgage defaults, you have to keep people working.

One way to do that is for the federal government to provide the funding for some major infrastructure programs, particularly in places where the economy is suffering and foreclosure rates are the highest.

The country has plenty of needs. Many infrastructure projects have completed planning and are just waiting for funding. A big check for construction will help fund necessary jobs and hold down unemployment. Benefits would also be more lasting than those from another one-time stimulus check.

· Allow people with poorer credit to refinance their mortgages. Federal Housing Administration loans are available for those with credit scores in the upper 500s. That's low enough to give most borrowers the chance to refinance out of their adjustable-rate mortgages.

Still, there are those who have missed a payment or two and whose credit scores are in the low 500s who would like to get out from under their now-unaffordable pay-option adjustable-rate mortgages resetting at 10 percent or higher.

While I believe that some folks used pay-option ARMs and other exotic loans to buy homes that they could never afford, a separate fund could be set up to refinance these mortgages, provided that the homeowners now have enough income to afford a regular 30-year, fixed-rate mortgage at some low interest rate. In return, the government could institute an equity-sharing arrangement should the houses be sold within the first five years of granting the loan. This should help promote affordability and stability in neighborhoods that need it most.

· Change the rules on refinancing newly converted investment properties. When people are out of work or can't sell their homes, they will try to rent them out, thus turning their primary residences into investment properties. But make no mistake: Most of these folks would sell these properties if they could.

As the owners of newly converted investment properties, they're no longer able to take advantage of low interest rates and refinancing programs. In fact, the market for investment properties remains rather frozen: If you want a loan, you had better have plenty of equity (north of 30 percent in many cases), a wad of cash for fees and the ability to afford a much higher interest rate.

Changing the residential mortgage lending rules to include properties that were primary residences in the past 60 to 180 days would provide some relief to homeowners who have moved to take new jobs -- and hold down the number of foreclosures.

And as part of the shared responsibility:

· Don't walk away from your mortgage. I have received many letters from homeowners who are wondering whether they should just walk away from their properties now that they are worth so much less than the mortgages. What local real estate markets don't need is to add to the number of homes going into foreclosure.

If you can refinance your mortgage to make it more affordable, you should do that. If you have to temporarily take a second job to keep enough cash coming in, then you should do that. There are long-term repercussions of going into foreclosure that should make this only a final resort.

If you can't sell but you can afford your payments, consider staying put for the next couple of years, until the market stabilizes. Let other homes for sale in your neighborhood get absorbed by bottom feeders and real estate investors while you shore up your finances.

Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is "100 Questions Every First-Time Home Buyer Should Ask." Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites, http://www.thinkglink.com and http://www.expertrealestatetips.net.

© 2008 Ilyce R. Glink and Samuel J. Tamkin; Distributed by Tribune Media Services