Next … Direct Housing Bailout?
National Association of Realtors and the National Association of Home Builders are calling for another stimulus package aimed directly at assisting home buyers. Well, why not? We are bailing out Wall Street, foreign investors, banks & insurance companies.
Why not? The recent pick-up in real estate sales in the last few months show that the system works without government interference. In any area, when home prices reach a level considered to be good buy, people will step up and buy.
Sooner or later, housing prices, like water, will find their own level. That level is what people can afford to pay, not what the government can borrow and lend to them to make a down payment. Unfortunately, in many areas, it appears that we are still some distance away from housing prices finding their level.
For those who think a government intervention is the only way out, I would say do it without direct taxpayer money. The undisputed key to this recovery is housing. If the government truly wants to ignite a fire under the housing market, I personally would propose a very simplistic approach that would have immediate results.
The government should pass a bill that allows any home purchaser, owner-occupied or investor buyer, who buys a residential property within the next two years and holds that property for a minimum of three years (and a maximum of ten) to be free of federal capital gains taxes upon selling the property. The potential, tax-free profits on my idea would be a huge incentive for investors to jump back into the residential housing market. This increased demand would clear the built up housing inventory in a matter of months for most areas.
Some prior posts on the government bailout:
Real Estate Bailout Bill — How They Voted
So Much For The Bailout
Housing Bailout & Your Vote
#1 EZ Fix to The U.S. Housing Market
Emergency Rescue Package – The Devil’s in The Details
Are the Rating Agencies at The Cause of Our Financial Mess?
Housing Bailout – The Real Cause?
Government Bail-Out – Risk & Reward
Summary of the “Housing and Economic Recovery Act of 2008
Second Home Foreclosure Tax Penalty
san diego commercial real estate
So Much For The Bailout
Wall street voices its opinion of the Government bailout. First it was the Government cash taxpayer rebate. Then we had a Government housing bailout effective October 1, 2008. Then, in a third step, the Government bailout program known as the "rescue bill," signed into law on October 5, 2008.
During the three business days after the latest bailout bill was voted on, Wall Street & all other world marketssaw huge declines. Note the Dow Jones Index chart shown below:
Now, Obama is already proposing another bailout plan. I would suggest that just like the Rocky movies, we name these new bills, bailout #1, bailout #2, bailout #3 … It would be much easier to reference these different bills if each was numbered.
I venture to say that somewhere around bailout #4 or #5 (the P.C. name of the next bill will most likely be "The neighborhood village revitalization Act") we will finally see the Government's real end-game: Behind on your home payments? Not to worry, we will rewrite your loan to the new depreciated value of your home and reduce your interest rate to today's rate. Plus, we will extend the 30 year term to 60 years to lower your monthly payments. If you cannot make your new drastically reduced payments, just pay what you can and we'll make up the difference by again extending your payback period beyond the sixty year term. Did I hear anyone say 100-year home mortgages?
Naturally, you can keep the new speedboat and SUV you purchased with your original home equity loan.
Real Estate – An Innovative Way of Not Filing Bankruptcy
The Federal Housing Administration announced FHASecure, a temporary initiative to permit lenders to refinance delinquent adjustable rate mortgages (ARMs) and/or to offer new subordinate financing where the combined loan-to-value ratio exceeds the applicable FHA loan-to-value ratio and geographical maximum mortgage amount.
The FHASecure Eligibility Criteria
Borrowers Current on Their Mortgages
The mortgage being refinanced must be a non-FHA fixed rate or adjustable rate mortgage. Cash out refinances are not acceptable.
If there is insufficient equity in the home, FHA will insure first mortgages where there is a:
1) Write Down. The existing note holder(s) writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage (a short pay-off); or
2) New Subordinate Financing. The FHA-approved lender making the new mortgage, the existing note holder or other interested party may take back a second lien by the amount which the payoff is short, including closing costs, arrearages, other reasonable and customary costs that are standard servicing practices and are included in all payoff statements or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits; and/or
3) Re-subordination/Modification. The note holder(s) of existing subordinate financing must re-subordinate or modify the existing subordinate lien(s) and re-execute at closing if the lien is to remain in effect after closing.
Borrowers Delinquent on Their Mortgages
How FHASecure Can Help:
The borrower's payment history shows no more than one 60-day late payment or two 30-day late payments.
If the borrower is unable to meet the payment history requirements specified above, the lender may still proceed with the refinance transaction provided that the loan-to-value ratio on the new FHA-insured mortgage does not exceed 90 percent and the borrower has no more than one 90-day late or no more than three 30-day late payments over the 12 month period prior to the rate reset or extenuating circumstance.
An Innovative Way of Not Filing Bankruptcy
****Resources of FHASecure can be located at www.hud.gov
Real Estate Record Home Price Declines
The latest S&P/Case-Shiller Home Price Indices were just released.
The 10-City and 20-City indices reached new record annual declines of 17.5% and 16.3%, respectively. The 10-City level marked its 10th consecutive monthly report of a record decline, beginning with data reported for October 2007.
While the annual returns of the two indices continue to reach record lows, the pace of the decline has slowed, particularly over the last three months.
For the three months of May through July, home prices cumulatively fell about 2.2%,whereas for the three months of February through April, and November 2007 through January, the cumulative rates of decline were closer to 6.0-6.5%.
A few prior posts on home value declines:
San Diego Real Estate – 5th Largest Decline Through July
Yale Professor … House Price Decline Could Be Worse than Great Depression
Survey Says Home Values Must Fall Another 14%
Summary of the “Housing and Economic Recovery Act of 2008
Billionaire warns global boom is over
Housing Bailout – The Real Cause?
Being a real estate broker for over three decades, I can unequivocally state that the basic facts in this video are correct. Today, everyone is blaming Wall Street or dishonest mortgage brokers. But, one has to trace back the real cause that allowed this to occur.
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Also, be sure to read these related posts:
Real Estate Emergency Rescue Package – The Devil’s in The Details
Are the Rating Agencies at The Cause of Our Financial Mess?
The Paulson Plan – Still Wrong
Government Bail-Out – Risk & Reward
Housing Bail-Out … Pass or Depression
Washington Mutual seized … Assets Sold
JPMorgan Chase jumps in to buy $1.9 billion in assets from the government. The bank's failure is the worst in US history and the 13th such failure this year.
The Office of Thrift Supervision said on its Web site: "With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business." San Diego California home listings