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4% fixed rate may cause another housing rush just as low rates did many years back. Who's to say we aren't blowing another housing bubble?
The real winners here will be the wealthy who will be able to buy upsome vacation homes on the cheap. They need to snap out of this quick!
"The loans would only be available to credit-worthy home buyers and homeowners seeking to refinance. "
So no one will be able to "buy more house than they could normally afford." No one will be able to "buy upsome vacation homes on the cheap" either. This doesn't apply to new purchases, only refinancing.
The idea here is to lower rates on existing owners to avoid more foreclosures. This won't help anyone offload inventory.
In fact, the sentence you quoted indicates clearly that the rate would be "available to credit-worthy home buyers and homeowners seeking to refinance."
Also, I understand that 4% would be for a limited term (I read two years). So what happens at the end of the 2 years? Do you have to refi at going rates and thus possibly wipe out alll your savings on the 4% (and possibly more)?
The language of "encourage lenders" really does not change the current status of refinancing. They could offer a 4% 30 year fixed by having the borrower pay points to obtain it. They need to strengthen the language or change the wording to 'must offer, with no buy down points' or some wording to that effect. If there is a loop hole for our money grabbing banking industry to get around offering 4%, without lining their pockets, you can bet they will find and use it.
Just my two cents worth.
You say: 'So no one will be able to “buy more house than they could normally afford.'. As Flexo pointed out this doesn't seem to be limited to refinancing. And it is quite possible that a credit-worthy person may decide to overtax themselves because of this. The matter of fact is that right now the same bad lending practices are still happening anyhow which just astounds me. Nobody has learned a damn thing.
If all goes well I should just be able to quit working all together and live off the government. Why should I work when there a thousands of wealthy people who will support me and my lifestyle?
Please note the sarcasm in my comment. Just another smack in the face of free market economics.
This is being done primarily to encourage the vulture investors who actually know what they're doing to buy up the excess inventory.
If the feds are going to help us (e.g. vulture investors) by creating a new 4.0% fixed rate loan, then hooray for us! A 4.0% loan will increase our monthly cash flow margins by a few 100 bucks each month, and allow us to roll those profits quickly into buying additional properties. Sorry to make it sound so nonchalant, but that's just how this once boring RE market used to work before days of cheap & easy credit sent it on a roller coaster ride.
Create a 4% mortgage: Senate Republicans are likely to introduce a provision that would encourage lenders to offer a 30-year fixed rate mortgage at 4% for a limited period of time. The loans would only be available to credit-worthy home buyers and homeowners seeking to refinance.
Throw in that kind of a deal and in 20 years we'll look back and say "We were in the right place at the right time."
payments, financial institutions would collect the same interest, securing the fiancial market,
and people would still be in homes. US Census--average American moves
every 5 years, they will never use the extension, stabilize the markets and
everyone is happy again. Simplistic? Yes. Sometimes simple is the best solution,
and cost the taxpayers nothing.
Show us the money and we will take care of the rest. I'll pay down my mortgage, buy a new GM vehicle and shop somewhere other than Good Will and WalMart. Trickle up will help the average Joe better than trickle down. It seems when we try the trickle down approach it gets absorbed by the big sponges at the top.
This may also help some of the illegal immigrants in our country but the government could set up a distribution point, hire some of the unemployed and have them check for citizenship before distribution of the funds. At the same time, a sweep of illegal citizens and deportation could take place which, as and end result, would save enough money from welfare, education, health and so forth that we could pay off the national debt in a few years.
I agree, wait until my home value drops to $180,000 so the investors can buy it and get rich down the road. I'll starve before I sell for that little.
One of the prime reasons we are in this economic mess is the loss of liquidy by the middle class.. there is no money left for the average family to purchase goods or services. A disproportiate share of income now goes to servicing credit. The financial industry went from 808 billion to amost 3 trillion dollars in the five years. These large companies take more and more of family income by raising intrest and increasing fees as a primary goal to increase profitability in that is growing expotentially, Remeber they manufacture or produce nothing salable. They issue credit, process transactions and service your debt. Too many on both ends of the spectrum have gamed the system ( 45% of income growth has gone to less than 1%) on the other side people have been given credit for credit cards, teaser mortgages who never had sufficent income or some never intended to pay their debts. This is a house of cards and an abyss that is tittering on col lapse. I now have a very good mortgage and will likely not benefit from the proposed change. But honestly I believe that if this is adopted, it is fair to all, it does not reward the bad actors, it would stabilize the home values, let more people who are on the margin a greater opportunity to stay in their homes - reduce foreclosures. Also it will provide a steady stream of liquidy to again purchase goods and services. - much better then a one time check.. The average home mortgage will save between $300 - $500 per month.
If you believe this has some merit please add your voice/comments and pass it on to your represenatives.
Thank you in advance
Barry
The new fixed rate could easily be implemented - applied in mass across the country - to all mortgages that meet the above critria. If this rate is adopted and stipulated at the federal level. No existing mortgages would need to be re-written or applied for. The financial services industry/banks then could easily implement this change quickly with simple code changes..
I believe this would immediatly give a kick start to the economy and provide a significant boost to middle class household income. Again, it stabilizes home values, reduce foreclosures and re-start consumer spending. = Jobs
If necessary they can use TARP money to initiate this. If anyone can advise me why this concept and idea is not feasable and fair.. I like to hear from you
As a side note, of course, I disagree with all the bailouts, and stimulus packages. It all smell of Socialism. This country is based on Capitolism, at least it used to be. Let the big banks and companies fail. Let home prices drop to rock bottom. Home prices are way to over inflated anyway. The economy will correct itself given enough time. Sure times will be tough for a while, but thats life. This country is way to greedy and materialistic. Its time we were set back a few notches. Things are getting out of control. Back to reality.