February
2009
Stimulate what?0
House Passes Stimulus Package
The U.S. House of Representatives approved an $819 billion stimulus package — the Economic Recovery Package — this week, which if approved by the Senate will extend all 2008 Metropolitan Statistical Areas’ (MSAs’) Fannie Mae, Freddie Mac, and FHA loan limits through the end of this year. The extension will prevent an MSA’s 2008 loan limit from being reduced in 2009 for Fannie Mae, Freddie Ma and the FHA. The bill also specifies that if an MSA’s loan limit is set to change, it can increase, but is prohibited from decreasing.
Well this may be good or not. I am not sure that anyone really knows. What millions of home owners need is not a $800 (or some other similar amount) that will just be used to pay mounting credit card bills. What they need is a major loan modification. The most usefull structure of these “loan mods” are that back payments get rolled up in a new loan with a much lower interest payment, thus reducing their current payment, in some cases drastically, and allowing them to stay in their homes.
This is the first line of defense … and offensive in this recession/depression. Before dime one was flushed away to AIG, banks and other companies, the most productive move, would have been, and still is, a huge program to facilitate, this new loan program. This could be a new product backed by the Feds and should include major lenders.
Right now all the defunct and soon to be defunt lenders like CountryWide, WaMu and others, are doing loan mods on their own and most get turned down. I am not saying that a principal reduction should be part of the program. That sounds a bit like charity. I am saying that providing a clear path to long term home ownership can be accomplished by long amortorization and a favorable interest rate, then everybody wins
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