"Reporting on Fannie Mae’s and Freddie Mac’s new program to reduce monthly mortgage payments for those people who have missed at least 90 days worth of payments, The San Francisco Chronicle’s Kathleen Pender reports:
That isn't the intention, but as the adage says the good intentions aren't always the best recipe for solutions that work. I have posted liberally on my Northwest Indiana Real Estate site that the key to the entire economy is housing, what we need most are more buyers. Fixing old mortgages won't fix this economy.Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.
“This is a once-in-a-lifetime opportunity,” Schiff says. “People are going to feel like complete morons if they don’t participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn’t afford.”
Some things that need to happen to encourage more buyers, in my opinion:
- Reinstate the FHA down payment assistance program that President Bush and Congress eliminated foolishly this summer. This program uses "zero" government dollars, the down payment help comes from the seller's funds.
- Encourage home buying by offering a substantial tax credit to anyone who buys a home in 2009 ... anyone, not just first time home buyers, not just owner occupied, anyone
- Drop the mark to market rules that are destroying the bond market for mortgages and causing interest rates to be above 6% even while sales are low. Supply and demand would drive rates down to 5% if this rule was removed, or modified to a three year average
- Local and State governments should look to buy actual homes, not the mortgages, the homes themselves. If thousands of local and state governments worked together to buy homes, the inventories would drop.
4 comments:
We were only able to purchase our first home because of the FHA loan, and an appealing low interest rate got us to move into a newly built home last year. I'm 24 and have owned two properties already -- because of the incentives of doing so. But now I'm not so sure I want to own anymore, if things keep going the way they are we will try to sell and just rent to avoid all this crap and hassle.
I think you're wrong Dan. Keep the house for now, you don't want to sell into this market.
I'd be curious what has you thinking renting would be better? In the State of Indiana rental properties pay higher property taxes, which will flow to the renters. There is no tax deduction for the mortgage interest so you're leaving all that on the table.
If you're worried about the value having gone down a bit, give it six months, we're already digging out here in NW Indiana, what we need more than anything are more first time buyers. Tell your friends.
My loose analysis suggests that every first time buyer who buys creates 2 jobs, tons of revenue to local government, and solidifies the real estate market for us all.
Good points. We don't really know our property value yet, not assessed yet. They are still building the house next door to me and much more development is to be done in my neighborhood, all new homes. Just not sure I want to be stuck in a mortgage if the market gets worse and we can never sell for even what we paid.
It will come back, trust me.
Glad to hear homes are getting built, that part of the market was devastated, that I know personally.
Inventories will start to drop especially if we can get rates under 6
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