Realtors are asking for a buydown on the rate to 4.5%
With a new President on January 20, 2009, just exactly what does this mean to the housing market. No one knows for sure exactly what this will mean, but, we are hearing pleas from Realtors nationwide. The National Association of Realtors and Realogy Corporation, a global provider for real estate and relocation, have both submitted a proposal to Congress for a federal buy down of the interest rates to 4.5%. “There are millions of credit-worthy people ready to jump back into the housing market, but they need to be motivated,” said Realogy President and CEO Richard A. Smith. “In our view, the incentive of substantially lower mortgage rates would directly stimulate the housing market — both in sales volume and price — and thus accelerate the overall U.S. economic recovery.” They are proposing that the buy down could be funded from the $700 Billion federal plan to put liquidity back into the markets. The buy down proposed would apply to the purchase of all homes under $1 Million Dollars. The NAR is also asking for a temporary $7500 tax credit for all buyers. There is also a request to make permanent the FHA limits to $729,750.
Realogy Corporation conducted a survey amongst their 2300 independently owned and operated real estate companies such as Century 21 and Coldwell Banker and the brokers unanimously stated that they predicted an increase in home sales if the interest rates were in the 4.5% range.
With this in mind, let’s take a closer look at Obama’s plan for the future.
Since the economy won’t wait until January 20th, plans for another economic stimulus package are already in the works. Obama has also mentioned a housing stimulus to include a 90 freeze on foreclosures. He also wants to implement the recently passed rescue plan and the Hope for Homeowners Act. This means the Treasury, HUD, Fannie Mae and Freddie Mac, and all of the banks and loan servicers who benefit from the rescue bill will continue to coordinate broad mortgage restructurings and loan modifications for struggling homeowners. No one knows for sure exactly how this will be implemented or what it even looks like yet.
Obama has also promised to repeal the 2005 bankruptcy bill. A controversial measure, this will allow judges to alter mortgage terms during a bankruptcy, providing more protection for struggling homeowners.
Obama is expected to create a 10% universal mortgage interest credit for those who don’t currently itemize. This means about $500 in savings for 10 million American homeowners.
During the campaign, Obama blamed the financial crisis on lax government regulations, so look for tougher regulations, new criminal penalties for mortgage fraud violators, more funding for enforcement programs, more detailed loan disclosure laws, new counseling programs and other consumer protections, including a new Home Obligation Made Explicit (HOME) score (kind of like a new APR calculation) to help borrowers better understand and compare mortgage costs during the mortgage process.
So it does sound like some good options for the housing market are in the works. That is good news for the real estate market in whole.
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