A Mortgage Buddy Brainstorming Creation
This just in:
The housing market is in trouble, unemployment is high, we can't figure out the debt issues, and Washington politicians appear to be more concerned about positioning themselves for the next election, than working on making the difficult decisions.
What I'm not going to do is read another post or write another blog full of negative commentary. We can all point fingers and say I can't believe this or that, but that doesn't solve anything. Let's rally ideas and people around possible solutions and put pressure on these politicians to make some changes. Over the past week I have been brainstorming about what I can do to be a part of the solution and the following the results.
I don't expect everyone to like all of these ideas, but hopefully it will get people thinking and participating in making a difference.
Refinancing Ideas:
For FHA insured loans: Lower the monthly MIP premium for current FHA loans. The last MIP change removed a lot of the benefits of Streamlining a FHA loan into a lower interest rate setting. If we can lower the monthly premiums back to .55 and raise the upfront to 1.5% for refinancing only, it would have substantial benefit for many FHA insured home owners. A way to help curve the cost of this change could be removing the MIP refund for loans over 24 months.
Lower credit score guidelines for FHA Streamlines to 580, ASSUMING that the home owner has an on-time 12 month mortgage history. This opens up more refinancing options for home owners who are struggling with their bills yet have honored the mortgage monthly payment obligation.
For Fannie Mae/Freddi Mac Backed Loans: Let's remove the loan to value restrictions. This will cut down on strategic defaults and again qualify more people for lower interest rates. I still think having a current 12 month mortgage history is important here as well. The "Making Homes Affordable Act" is great but we need to go a little further. This was put into action over 2yrs ago and it needs to be reviewed.
Refinancing creates liquidity for the markets without printing money. If we can have a mass refinance wave for 6 months based on creative yet responsible refinancing guidelines, we can create an amazing amount of liquidity for the American home owner. By liquidity I am referring to extra or disposable monthly income. The liquidity needs to go to the home owner not to the bank. If all of these home owners had extra money every month, it would fuel either one of two positive things. The best option would be more spending which would boost GDP and therefore the need for hiring. At worst, it would create more savings which would improve troubled banks deposit bases giving them more money to lend to small businesses.
These are responsible concepts that do not require bailout money or allow for the creation of a moral hazard.
Home Purchase Ideas:
Let's start to phase out the mortgage interest deduction. I know, I probably just got a collective BOOO from the agents that use this in their own vs. rent pitch, I present the same benefit to first time home owners as well, BUT, think of this statistic for a second. Less than one-third of Americans, those who make enough to itemize deductions on their tax returns, benefit from the tax break. It gives no relief to renters, who make up the majority of a city's population. According to the nonpartisan Tax Policy Center, 70 percent of the benefits of the deduction go to households with incomes over $104,000 per year. Those for the most part are not the people in dire financial trouble right now. We need create a program without printing anymore money.
Removing the mortgage interest deduction would create 100 billion dollars a year in revenue. Let's take 75% of that money and invest it in creating grants and home ownership incentives for the next 3 years and apply the other 25 billion towards our national debt. Then after 3 years keep only 25 billion for programs and have 75 billion towards our debt.
Ideas for Using the Tax Deduction Revenue:
More Neighborhood Re-Investment- Use national funds for local re-investment. We need to revitalize whole neighborhoods, and investors will need incentives to do that.
Investment properties: Have a down payment matching program or allow a second mortgage grant to help move the inventory for investment properties.
Expand the 203k loan: This is a great FHA purchase product but we need to re-work this for investment properties in needs of fixing.
I'm sure there are dozens of ideas that would work but I think this blueprint is a solid starting point to facilitating a positive impact on the housing market. This is our country and our homes. We need to start becoming part of the solution and not complain about the problem. Let's share ideas and move markets.
Comments(5)