Will an Obama Economic Plan Include Enough Incentive for the Home Mortgage Industry?
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by: marciafreeman
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The country is two months into 2009 and a few weeks into a new Presidential administration. More Americans are losing their jobs and the economy shows little signs of revival. The new President has made it clear that breathing life into the housing sector will be a focus of any stimulus plan. Republicans presented a plan that would reduce home mortgage interest rates. That plan could drop interest rates to 4 percent for a home mortgage. That is a significant drop to the already historically low rates being offered right now. As of the first of February, the interest rate for a 30 year fixed rate home mortgage was 5.1 percent. Proponents of a rate decrease think it will be enough to help hesitant buyers take the plunge into the real estate market. The inventory surplus of homes sitting on the market will slowly be trimmed down, if buyers are enticed to buy because of discounted home mortgage interest rates. The National Association of Realtors estimates that every percentage point drop in home mortgage rates encourages 500,000 new sales. Many believe that the housing sector can begin to recover once people start buying up some of the inventory.
Cheaper home mortgage interest rates are not the only thing lawmakers are discussing. Temporarily expanding the first time home buyer credit to all home buyers is another component being discussed. The credit would also be increased from $7,500 to as much as $15,000. There would be an income qualification of $150,000 per year for those filing joint tax returns and $75,000 for an individual. Slowing the home mortgage default rate is certain to be included in any plan. Many banks have voluntarily postponed any home mortgage foreclosures until after the details of any stimulus plan to help the real estate sector are announced.
Consumers, banks and investors are anxiously awaiting the specifics of the stimulus plan. Regardless of the various components being debated, it seems guaranteed that any plan will target the home mortgage foreclosure rates and encourage consumers to buy. In January, the new administration announced that it would like to use half of the remaining TARP funds to help reduce home mortgage foreclosures. He also supports giving banks incentives to work with certain qualified consumers who are behind on their home mortgage bills.
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