Almost One of Three Homeowners Under Water
According to Moodys, almost 27 percent of home owners are now under water and owe more on their mortgage than their house is now worth. Obama has some new ideas to help homeowners wending their way through this uncharted territoryFannie and Freddie
Refi - Remove restrictions from refinancing mortgages Fannie and Freddie own or have guaranteed when more is owed on a home than it is worth. The White House says this could reduce monthly payments for up to 5 million homeowners.
Incentives
Lenders - The government will make up part of the difference between the old monthly payment and the new, for those lenders that will reduce the value of a mortgage. Participating lenders would be required to cut payments to no more than 31 percent of a borrower’s income. Up to 4 million homeowners could benefit.
Liquidity - The Treasury Department and the Federal Reserve will continue to buy Fannie and Freddie mortgage-backed securities to maintain stability and liquidity. Obama has 200 billion for this project.
The government said it would absorb up to $200 billion in losses at each company, by using money Congress set aside last year.,
New Bankruptcy Rules - Changing bankruptcy rules so judges can reduce mortgages on primary homes to their fair market value. The borrower must abide by the court mandated payment plans.
Community Support - 2 billion in grants to communities that will use innovative methods to help reduce foreclosures.
When we are done with all of this expense we will be looking at a debt to equity ratio of 90%. The next generation will be saddled with very high taxes and/or inflation.
Obama's argument is that we can grow our way out of this with an economic expansion of 3-4% a year. I certainly hope we can because otherwise we will be an aging, indebted society that will have to make hard choices about caring for its elderly and educating its immigrant young.
Warren Buffet just released his annual shareholders report, dismal though it was he left us with this: "Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead." Amen
Thanks for Reading
Howard Bell
A web site of over 450 articles related to real estate focused primarily on property management.
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