The New President and His Team Are Working Out Measures to Battle Foreclosures
Having come to the conclusion that at the root of the economic woes is the housing crisis, the new President and his team are working out measures to battle foreclosures on a war footing.
The key to the solutions is to see that the beneficiaries are the right persons and not the irresponsible borrowers or the predatory lenders. Among the measures being thought of are moratoriums on foreclosures, reducing the interest by half and extending tax credit to purchasers of foreclosed houses. On these various issues there is much parleying between the President’s team and the House as well as the Senate.
In 2008 a tax credit scheme had been created for those who were buying houses for the first time. Various housing and industry groups want the tax credit to be a percentage calculated on the purchase price of the property with the maximum amount being $22,500. They want all house purchasers to be included in this scheme and not just the new buyers.
A noted housing consultant from Irvine, John Burns, has suggested that the tax credit should be matched with down payment facility of up to $15,000. He argues that by doing so the borrower would be encouraged to invest more personally. He also suggests that the credit be subject to “recourse” in the case of the borrower defaulting. In some of the states like California, the house mortgages are by and large non-recourse loans. This means that in the case of default the borrower can lose the house as well as the collateral but they are not expected to repay the full amount of loan taken. Burns also advocates for the temporary doubling of interest deduction on mortgages for all house owners. He contends that such a step would be of help to those who are about to default. It will also allow others more disposable income – thus giving a fillip to the general economy.
Many of the suggestions would be of benefit to builders as well as the lenders. The latter would be able to get back the full amount of loan due to them. But it is uncertain how much the suggestions will help the borrowers who have gone underwater – the worth of their houses being less than the loan amount due.
Last summer Rep. Barney Frank (Democrat) who was the chairperson of House Financial Services tried to address this problem with an operation named Hope for Homeowners. But so far the impact has been limited.
Related Posts
