Posted on 02/01/2009 10:12:39 AM PST by Fred
Washington — It sounds too good to be true, and it just might be: 4 percent, 30-year, fixed-rate mortgage loans to buy or refinance houses, guaranteed by Uncle Sam.
What homeowner in Nevada wouldn’t sign up? Thirty-year fixed-rate loans are going for just over 5 percent, an excellent rate by modern standards.
The 4 percent loans are among several housing-related provisions Sen. John Ensign and Republican leaders in the U.S. Senate are developing as alternatives to President Barack Obama’s nearly $900 billion economic recovery plan now before them.
Republican senators are hoping to put a more lasting imprint on the bill than their House colleagues were able to achieve — the House bill passed this week without a single Republican vote. Republicans complain the bill is bloated with excessive spending that will do little to achieve its goal of stimulating the economy.
Adding a more robust housing component is one way to attract attention, especially in Nevada, which has steadily led the nation in rate of foreclosures.
Nationwide, 2.3 million homes were in foreclosure in 2008, with more expected this year.
“How many of you would like a 4 percent mortgage?” Ensign asked this week in floating the plan. “You have to fix housing; otherwise I don’t think the economy is going to recover from this.”
No details about a 4 percent program were available Thursday. Presumably, borrowers would be required to meet stringent loan requirements of the kind the lending industry reinstated in the aftermath of the meltdown from subprime mortgages, which required little documentation of income or other evidence of ability to pay.
But more homeowners can meet tougher loan standards if rates drop from 5 percent to 4 percent.
Ensign said Republicans are considering a three-pronged housing strategy that includes the government-backed low-rate mortgages, a $15,000 tax credit for homebuyers and a yet-to-be outlined program to help homeowners whose mortgages are upside-down, which means the home’s value is less than the loan balance. Home values in Las Vegas are now at pre-bubble 2003 levels.
The urgency in addressing the mortgage mess is something Democrats regard as an about-face for Republicans. Many in the party dragged their feet in the spring and summer as Congress was trying to pass a bill to bring relief to homeowners as housing prices began their free fall.
Ensign himself stalled the bill for weeks as he tried to attach a provision for tax credits for renewable energy developers. At one point during the standoff, Senate Majority Leader Harry Reid said thousands of homes a day were falling into foreclosure while Senate Republicans held up debate.
Ensign ultimately voted against the bill, the only member of the Nevada delegation in Washington to do so. (He had supported an earlier version.)
Ensign’s office at the time said most of the calls from constituents were from those opposing the bill. In voting no, Ensign said at the time: “This bill, I believe, is dumping the burden onto the taxpayer and bailing out a lot of irresponsible lenders.”
This week, Ensign said things have changed.
“We’re in a different time,” he said. The economic problems are real and the mortgage mess is creating a downward spiral that is pushing Republicans to take steps they normally would not consider. “A lot of us would not like to have nearly the government involvement even close to what it is right now,” Ensign said.
Though Obama’s American Recovery and Reinvestment Act includes some aid for homeowners, broader solutions are being considered outside the debate over the stimulus bill.
A separate House-passed bill pushes the Treasury Department to provide mortgage relief by using up to $100 billion from the $700 billion Wall Street rescue fund. The new Treasury Secretary, Timothy Geithner, signaled Wednesday he was working on a plan.
Washington’s main response to the mortgage crisis so far has been last year’s landmark housing bill, which created the Hope for Homeowners program. The program was expected to help 400,000 homeowners work with their banks to write down loans to more affordable levels.
The program has fallen short. A report to Congress last month said only 300 loans were being reworked. Congress and the Bush administration blamed each other for the shortcomings, with experts saying the program stumbled for a variety of reasons as lenders were reluctant to take losses and borrowers were unable to meet eligibility requirements.
Bert Ely, a banking consultant watching the debate, said ideas for a government-run program to offer low, fixed-rate mortgages surfaced late last year. But interest in it waned once the costs were considered.
Republicans were not able to provide a cost estimate Thursday.
“When you start getting into the numbers, you start to realize it would be very difficult to execute and could be quite expensive,” Ely said. “You’re talking about millions and millions of mortgages.”
Democrats are willing to consider the Republican proposals, a spokesman for Reid said.
However, Democrats add that the bill does have housing provisions, including a $7,500 tax credit for those buying homes.
In the House, Nevada’s lawmakers tried to boost the housing provisions in the stimulus package that passed Wednesday evening.
Republican Rep. Dean Heller offered an amendment in the Ways and Means Committee that would have enhanced the $7,500 tax credit for homebuyers — much the way the Senate Republicans are trying now to raise it to $15,000.
Heller won support from Rep. Shelley Berkley, the only Democrat to support it, but the amendment died in committee on a party line vote.
I think this is a BRILLANT maneuver....it could suck all the money out of any other alternative and beats the BAD BANK idea!
I don't think the Demoweenies can let this happen...now they have a problem...
Wrong!
It slows down the Democrats with their wasteful spending...
Agreed, Question, they are pretty much throwing the houses away in Sin City...Perhaps now is the time to act (am not a realtor, just shocked at the prices in Vegas)
Actually, she’ll get the low payments in any case. If this garbage doesn’t pass, she’ll get a much cheaper house, with a somewhat higher rate (much easier to pay off).
Absolutely the LAST thing we need is more preferential treatment for real estate. This is what fed the bubble in the first place, distorting investment streams and making housing more expensive than it needs to be.
But never let it be said that the GOP has given up its role as The Stupid Party. They work too hard at keeping that title.
What the heck are folks waiting for? I do not get it. The houses in Vegas are a solid 10% below replacement cost?
If saving the banks is the goal, it makes more sense to pay off ALL mortgages, not just the “problem” ones.
Since this would require public financing (gov’t paper of different kinds), the money would flow out, and flow back in, and then flow back out plus interest, over 30 years. Thanks Ernest.
What a ridiculous idea.
The long term solution is to drastically cut the size of government, reinstitute tariffs on imports, zero the personal income tax, get back on a commodity currency standard, and get rid of the illegals. I’m not sure that the Chinese would agree to use putting tariffs on their goods - they might sell our treasuries, causing a currency crisis - but at some point we need to take our medicine and get back to a solid foundation.
We WILL survive economic hard times, but socialism and globalism will destroy America if we don’t end them.
You do realize that they haven't repealed the CRA? All this does is add yet another level of bad debts and kicks the problem down the road. It fixes nothing. They need to drain the swamp first, by cancelling the CRA.
However, cancelling the CRA also cancels the flow of money into housing, which would knock housing down another bunch. And it would result in somebody, lots of somebodies, losing their houses and maybe going bankrupt.
After the CRA is cancelled, one possible fix would be to give money to folks to buy down their mortgages to a level they can afford. The banks (and the savings accounts they support) would be ok. Housing prices would still fall greatly. New housing would be dead. But eventually the problem of bad mortgages would stop.
Of course, the level of corruption in handling out the money would be staggering. And it's possible that it would be impossible to stop the handouts. And it would greatly punished the savers of the country, but that's going to happen anyway.
Yes.
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