optimusprime_IHB
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TheStreet.com
Frank Curzio
Obama Does Not Get Housing
2/18/2009 10:22 AM EST
There is no doubt that something must be done to stabilize the housing market. But a plan to keep people in homes they can't afford is not the answer. Under the plan, payments are expected to be reduced to 31% of borrower's pretax income but unemployment is surging and incomes are being slashed.
If this recession persists, a year from now these restructured mortgages will be in default again. Also, most of these borrowers can't pay the principle so restructuring their interest rate will do little. Haven't we learned anything from the Shelia Bair plan where over 50% of restructured mortgages are now back in default?
I say let all the mortgages that people can't afford go into default and also make foreclosed homes easier to purchase. There are a ton of potential homeowners on the sidelines waiting to buy into this market but the government provided NO incentive for these people to buy a home in the stimulus plan. What happened to the $15k tax credit? Instead Obama says he will bail out the "responsible homeowners" but how do we determine who is responsible and who wasn't?
Most of these borrowers took out home equity loans and bought flat screen TV's for every room, in-ground sprinkler systems so their lawn could look better than their neighbor's and new cars. Now the responsible people on the sidelines have to foot the bill for these so called "responsible" homeowners.
One question to Obama: What is more likely to stimulate the economy: Saving homeowners that can't afford their mortgage or helping people on the sidelines who have a 20% down payment that will spend money on new furniture / paint / supplies...?
Frank Curzio
Obama Does Not Get Housing
2/18/2009 10:22 AM EST
There is no doubt that something must be done to stabilize the housing market. But a plan to keep people in homes they can't afford is not the answer. Under the plan, payments are expected to be reduced to 31% of borrower's pretax income but unemployment is surging and incomes are being slashed.
If this recession persists, a year from now these restructured mortgages will be in default again. Also, most of these borrowers can't pay the principle so restructuring their interest rate will do little. Haven't we learned anything from the Shelia Bair plan where over 50% of restructured mortgages are now back in default?
I say let all the mortgages that people can't afford go into default and also make foreclosed homes easier to purchase. There are a ton of potential homeowners on the sidelines waiting to buy into this market but the government provided NO incentive for these people to buy a home in the stimulus plan. What happened to the $15k tax credit? Instead Obama says he will bail out the "responsible homeowners" but how do we determine who is responsible and who wasn't?
Most of these borrowers took out home equity loans and bought flat screen TV's for every room, in-ground sprinkler systems so their lawn could look better than their neighbor's and new cars. Now the responsible people on the sidelines have to foot the bill for these so called "responsible" homeowners.
One question to Obama: What is more likely to stimulate the economy: Saving homeowners that can't afford their mortgage or helping people on the sidelines who have a 20% down payment that will spend money on new furniture / paint / supplies...?