As a professional investor and a financial writer I have a pretty good understanding what will help stimulate the housing market and this dormant economy.
Three weeks ago I wrote in my weekly blog, I wrote that the first part of my solution is to have Fannie Mae and Freddie Mac invite non-delinquent homeowners with underwater mortgages to apply for refinancing if their loans are backed by the government-sponsored entities.
Fannie and Freddie should be required to waive risk-based financing fees and permit loan-to-value ratios over 125 percent, which is the current limit for making refinancing available.
While current interest rates for 30-year home mortgages continue to approach 4 percent now, some 8 million of the 27.5 million mortgages held by Fannie and Freddie have interest rates over 6 percent.
My solution would allow millions of current mortgage holders to lower their annual mortgage payment significantly.
In his televised speech last night, President Obama said the following: "And to help responsible homeowners, we’re going to work with Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4% — a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices.”
Now many are opposed to this but there is no moral hazard here. All these people are not getting their principal reduced, and this program is only to help responsible homeowners that are current on their mortgages.
Let's be honest. A person who takes out a mortgage and pays their mortgage faithfully is doing nothing wrong. In my opinion, they are especially noble if the house is underwater. The least we can do for these well-intentioned folks is to let them benefit from the lower interest rates.
Some people are opposed to this, but the U.S helps many countries and people who cannot help themselves. Why not help some well- intentioned person who stays current on their mortgage? The American homeowner is the backbone of our country.
Mr. President, We come from different backgrounds — you a Harvard-educated lawyer who spent your life in the public sector and me a self-made, financially independent street-smart investor.
There are some parts of your jobs bill that are simply not worthwhile. But my suggestion on mortgage assistance will help millions of Americans stay current on their mortgages and the extra savings will put money into their pockets and help them pay down their principals faster or help fund future home improvements that would otherwise have not been affordable.
Both Democrats and Republicans should approve this part of the bill even if they can’t find common ground on much else.
Call your congressman and senator if you agree.
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