My wife and I were watching the news for most of the morning today. We saw the candidates, the President, Chairmans of the Fed and Treasury, etc. The essence of todays news is that somehow or another the government is going to "buy" the inventory of bad loans from troubled banks. I guess similar to the Resolution Trust from the late '80's.
While my statement may not be 100% factually correct .. that is the essence of it to the tune of hundreds of BILLIONS of dollars. In government terms that will probably not be billions when they are done but will actually be trillions.
So my wife made a comment and I had to think about it for a minute and then I thought .. why not? her comment was , "Why don't they just give the money to qualified buyers to help them buy homes? Maybe in the form of a (temporary?)rate buydown instead of a down payment".
So maybe the buyer have to come up with 3% down for an FHA loan and then they qualify at todays rate of 6% or so. But then the payment is bought down to say a rate of 3% or 4% and maybe even have the rate slowly graduate up to the full rate over a period of years so there are no huge adjustments or payment shocks.
Think about it. At some point all of the homes need to be sold anyway. Don't use the money for down payment assistance, use it to make the homes more affordable and then let the banks continue to sell the homes themselves. This would increase home ownership, and dramatically stimulate the housing and construction industries. The banks get out from under the loans, although not as quickly as they would in a gov't buyout.
All of this is just sort of my first gut reaction, and I would rather the gov't not get involved at all. At this point however, I don't think that there is any avoiding gov't intervention anyway.
In my gut I think it would be better to give the money directly to the public rather than to create another government entity.
Have I totally lost it? Or am I on to something? Tell me your ideas.
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Bob Southard, e-ProRealtor®, Solid Source Realty, Inc. Buy or sell a home in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga
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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Smyrna, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs. Visit my website
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Hey, I am on the same page with you, buddy! Your idea makes a lot of sense, but I am no wiz on the subject.
It wouldn't hurt to write or call local representatives about it- after all, it is their job to work for us, the people!
Thanks for sharing- I'm calling Jay Inslee, my rep, right now!
Kind Regards, Nicole Weidauer
The Egerer & Weidauer Team, Keller Williams Realty North Seattle
Good thought, Bob. The Mrs' idea is a great one. Changes in real estate financing practice are on the way. I suppose the question is how the money would be applied in a buydown for already existing inventory as opposed to a new construction loan. Hope you have a fine weekend.
My gut reaction was also to be discontent with the idea of the government stepping in. I'm no economic genius here, but I think the problem right now lies with this bad debt crippling the firms from being able to continue doing business, but no one will buy it. Giving the money to potential homeowners wouldn't solve the liquidity crisis on Wall Street, and it wouldn't keep struggling homeowners from foreclosure, it would probably just boost the housing market a little. Overall, I don't know that the effect on global markets would have moved the market like bailing out Wall Street did today.
This is just the beginning. Asthey develop their socialist mindset the next thing to fall will be the real estate industry as it is prime for take over. The we would be working for a 1% maybe fee and all transactions would take place directly with another government office funded by tax payers. Don't laugh it's all part of the scheme of the Democratic party and fall right into the hands of a socialist government. We have not stood strong enough against this type of crap and now we will pay.More important is the reason to change the Congress and not let a liberal in the white house. Unless of course you like this an dare willing to turn everything over to the government including most of your check and rights. Once it happens there is not turning back without rebellion. Best to all...
Hi Bob. Good idea. I am concerned with the government intervention going on. They have crucified the short sellers and become bigger than ever.
Thanks for writing,
Ken
Giving money to the public would not solve the liquidity crisis in the financial sector. Financing is based on money being lent out at a certain rate of return, to another institution, that then lends it out at a certain rate of return, which then lends it out to someone else, and so on. If defaulting loans were simply modified to a lower interest rate, then the company that holds that paper, could not payoff the entity they borrowed the money from, and so on. The entire financial system would be sueing each other for breach of contract, and the circulation of money (the economy) would come to a halt. That's where we are now. That's why the government is stepping in to try and buy many of these bad loans, so that the financial sector can move forward. Unfortunately the consequences to us, as regular citizens, will be inflation, because money will now be less valuable. Everything will soon be more expensive.
This is the third time that I have heard the approach that the Government should give the money to the people. In turn, spending would stimulate the economy.