Senate to debate Fix Housing First Amendment

By
Real Estate Agent with Coldwell Banker Apex, Realtors

Right now the Senate is debating the latest version of the Economic Stimulus Bill proposed by President Obama. We as Realtors support the passage of of this provision of the bill.

Reprinted here is an outline first detailed by the Keller Williams Realty International Office:

Fix Housing First Act

· Through lower mortgage rates, provides the equivalent of more than a $400 per month tax cut for 30

years to more than 40 million creditworthy American homeowners.

· Provides an additional $15,000 tax credit for the purchase of a new home.

· Includes targeted income and business tax cuts to help create new jobs.

How it Works

 

4.0 to 4.5% Fixed-Rate 30-Year Mortgages

· New and refinanced mortgages would be available for 4.0 to 4.5% -- providing a monthly savings of more

than $400 for the average homeowner's mortgage payment.

· Banks would issue these lower fixed-rate mortgages on primary residences - both for new home

purchases and for refinanced mortgages for responsible homeowners.

· To encourage banks to issue these mortgages, the government will direct Fannie Mae and Freddie Mac to

purchase these newly originated loans. Homeowners already holding loans from Fannie and Freddie

would also qualify.

· The new, lower rate would be roughly between 4.0 to 4.5% today. The rate would be calculated based

upon the historic spread between the 10-year Treasury bill and the 30-year fixed mortgage rate.

· The program would not be for "jumbo" loans.

· These mortgages would be available only until the end of 2010 - the time period of a targeted stimulus.

· The cost of the program is capped at $300 billion, though economists believe it would actually be much

less.

$15,000 Homebuyer Tax Credit

· The proposal expands the current first-time homebuyer tax credit to make it more attractive and

effective.

· Specifically, the size of the tax credit is doubled from $7,500 to $15,000 (or 10% of the purchase price,

whichever is less) and the program is expanded to cover all primary residences and all homebuyers, not

just first time homebuyers and vacant or foreclosed properties.

· Available for purchases made between January 1 and December 31, 2009.

· The cost in lost revenue to the government is about $20 billion.

Loan Modifications

· Privately securitized mortgages are at the core of the housing crisis. They account for more than 50% of

all foreclosure starts, despite accounting for only 15% percent of all outstanding mortgages.

· This provision could substantially limit foreclosures at an estimated cost between $9B and $12B by:

o Temporarily (for 3 years) compensating servicers who modify privately held mortgages to allow

homeowners facing foreclosure to pay lower monthly payments.

o Temporarily (for 3 years) eliminating legal barriers to loan modification and creating a "safe

harbor" from lawsuits for servicers who act in good faith to do loan workouts.

A Real Stimulus: More Bang for the Buck

 

· At a cost to taxpayers of only $300 billion, the 4% mortgage plan could provide up to $6.1 trillion in

savings to homeowners over the course of the 30-year loans - up to $150,000 for the average

homeowner.

· That's over $5,000 each year they can spend on other priorities for their families - spending that will spur

job creation.

Restoring Homeowner and Financial Security

 

· The economic downturn began with a collapse of the housing market; no stimulus plan will work if we fail

to address housing. If we don't fix that problem, we'll only be treating the symptoms.

· More than 860,000 properties were repossessed by lenders in 2008, more than double the 2007 level.

· The Fix Housing First Act will bring security to homeowners, thereby stabilizing the housing market and

financial markets:

o Increases home sales by lowering costs for new homebuyers, reducing the extensive backlogs of

housing inventories

o Decreases foreclosures by allowing eligible homeowners to refinance into more affordable

mortgages and by incentivizing mortgage servicers to do loan workouts

o Helps stabilize housing prices by increasing the number of homes sold and decreasing

neighborhood foreclosure effects

o Helps facilitate loan modifications for struggling homeowners

o Eliminates the uncertainty for the value of securitized mortgages held by financial institutions,

lowering their need to hoard capital and increasing their ability to lend

o Stabilizes credit markets by providing new cash flow to financial institutions.

While the enormity of the stimulus package is overwhelming, these are extraordinary times we find ourselves in. The housing sector of the economy must be fixed in order to see any type of economic recovery.

We are hopeful that the two political parties can put aside their posturing and move this Economic Stimulus Bill through to passage.

 

 

 

 

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