Will an Obama Economic Plan Include Enough Incentive for the Home Mortgage Industry?

President Obama has not even been on the job for a month yet, and already he has his work cut out for him. 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. They feel that lower home mortgage rates will help reduce the current glut of unsold homes. 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.
In addition to reducing home mortgage rates, Congress is debating other means to address the housing sector directly. One proposal is to extend a tax credit to all home buyers, rather than just those buying for their first home. 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. Reducing the amount of home mortgage foreclosures is another topic being addressed. 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. It is unclear how many details currently being discussed by lawmakers will be included in the plan, but President Obama has made it clear that he would like to prevent more foreclosures and reduce home mortgage costs for consumers. Shortly after taking office, President Obama said he favors putting half of the money remaining from the stimulus bill introduced by the last administration toward decreasing home mortgage defaults. He also supports giving banks incentives to work with certain qualified consumers who are behind on their home mortgage bills.

Comments

Add Comment