I believe now that we have finally stepped up long overdue workouts of borrowers in foreclosure, it is time to focus on creating a stimulus package to entice buyers back into the market. New buyers could begin absorbing the glut of foreclosure vacancies and stabilize prices.
Allow me to suggest the following: With the Fed being our de-facto mortgage lender for the foreseeable future it is time for HUD to step in and establish a short term Mortgage Stimulus Package with a temporarily reduced rate. Until the 1980's HUD set the FHA rates; as the market fluctuated loan points would vary accordingly. Huds needs to step in again and take control of rates for 12 months. As of last Friday, 11/7, the Chase Home finance FHA rate I was quoted was 6.5%. I propose a mortgage Mortgage Stimulus plan that would look something like the following:
FHA rates at 4.5%, with 1-1.5 points so lenders could be paid for their work and as loans could be sold to the FED lenders would not need to keep the products on their books and could instead make their fees in origination. Note: 4.5% is a higher yield than the current treasury rate.
- The program would be available to 1st time borrowers. This would stimulate the pent up demand and preclude those with good credit who are upside down in their mortgages from buying a lesser property then allowing their original property from going into foreclosure.
- For the upside down, but credit worthy borrower, relief could be offered by refinancing their existing loans at full loan value- even if it is upside down- but at the lower rate. Most of those who are upside down don't want to incur the additional expense of moving, or the stigma of ruining their credit, they just need some relief. Those who need to sell and move still have the not so great Short Sale option.
- The program should be offered for 6 months. If it is successful, it could be continued on a quarterly basis, modified to increase the rate, or phased out.
- Reduced to 4.5% the borrower who today could afford a $200,000 property could afford at the same payment a $249,000 property. This additional buying power would quickly aid in stemming the deflationary property value spiral we are currently experiencing.
Finally, in 2003 when the FED rate was 1% mortgage rates were, on average, well below 6%. Until we stabilize housing, nothing else will get the economy back on track. A short term Mortgage Stimulus Package would give us the leg-up we need to help get this economy jump started again.
Sincerely; Amy Fisher
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