31 Jul 08 
Help is here… or is it?
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On July 30, President Bush signed the 700 page bill “H.R. 3221″ This bill could provide $300 billion in government backed mortgages. The bill provides funding for counseling agencies, block grants for communities to buy and rehabilitate foreclosed properties, tax breaks for first-time home buyers and protections for older Americans and veterans returning from military service. This will also allow for more oversight on Fannie and Freddy. The new program begins Oct. 1 running till Sept. 30, 2011. I have heard mixed reviews from colleagues that I have spoken with about this. I am on the fence and want to know what you think?
Try to convince me on whether it is a good idea or a bad one.
- Do you think that the Government doing this is a good idea?
- Is this how we got into trouble in the first place?
- Or is this exactly what we need to boost/stabilize real estate markets?
Whoever gives the most convincing argument on either view will win a month of free advertising on the blog home page. No novels please. ; )
What say you???
Tags: bill, Bush, contest, government, h.r. 3221, new
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While too much government can be detrimental to the economy, the government can play a good role by keeping the pendulum from swinging too far in any one direction. In this case, the program may keep the rug under the economy.
Bottomline, if you read the fine print in the bill. You can’t have any liens on the property but the first mortgage. 99% of the people who are upside down have second mortgages. Bill wont do much, plain and simple. =) How did i do?
* Do you think that the Government doing this is a good idea?
We have to bail out Fannie/Freddie obviously or all hell will break lose.
I used to say No we shouldn’t help the homeowners, but the more I’ve researched why this happened I realize that most homeowners (not speculators) were just trying to buy a home and because of the way the system was abused (by the Wall Street and the banks) the homeowner unsuspectedly bought an overpriced home.
* Is this how we got into trouble in the first place?
This question is implying that Government intervention is “how we got into trouble in the first place”. Actually too little government intervention is “how we got into trouble in the first place”. Wall Street and the banks took advantage of the free market (dishonestly). We actually need the government (new laws and better regulation) to prevent stuff like this happening.
*Or is this exactly what we need to boost/stabilize real estate markets?
The plan may help the markets a little, but has been done has been done. The best thing for the real estate markets is for home prices to return to the mean, another way to put it is that home prices NEED TO BE IN LINE WITH WAGES. Then and only then is when people in droves will feel the confidence to buy.
When is this contest over?
Good article Paul, I had not heard anything about this bill..lord knows there are a ton of people that need some assistance ASAP, and October may not be soon enough. And as Jeff said, it may not help if they have other leans on their property. But hopefully it will help out the overall real estate market.
[...] great Paul), has a post that discusses the recent bill “H.R. 3221? which is designed to provide relief to the real estate market. Want to get some free advertising on Paul’s blog, stop in and voice your opinion about the [...]
@Jeff - You did great thank you for stopping by! How do you like “FlexMLS” It looks like it just went live. Do you deal specifically with short sales?
@Go-Zone - The contest winner will be contacted on Monday the 18th.
We have to help these people because their situation affects the whole country. I know a couple that is in their 50’s who have been retired for several years now but have decided that they were going to open a business. Every month they get a rent check for a little over $18,000. They had the hardest time getting the loan and were denied twice. They went through SBA and ended up putting I believe, 40% of the loans value down just to get approved. What if they didn’t have that kind of money? They wouldn’t have a business and couldn’t hire employees that pay taxes. We have to clean up this mess IMO.
Yes, I do deal specifically with short sales. For that, I have to keep up to date on issues like the new bill. As for the new Flex MLS, I really like it. It really combines some of today’s technology. Of course there are a few small things I feel they skipped over. I guess thats expected. Nothing too big.
I say, too little too late. Though the Northern New Jersey markets seem to be doing a lot better than the same months in 2007.
Since we are now almost two weeks since the law has passed, we are seeing mostly positives from the new law.
As a lender that is still in the business, this will be helpful to us who remain. The $7,500 tax credit (ie: tax free loan) for first time home buyers will be very helpful. We are talking to these clients and showing them that they can purchase a bank-owned (REO)property for 3-3.5% down plus provide up to $43,000 for renovations of their new home and they get $7,500 in a tax-free loan.
This is a great time to be a first time home buyer. They will be the ones that pull us out of this mess.
James,
How is the NJ market these days?
Jeff
If we really want to clean this mess up we first must start by bringing back investor confidence in mortgage backed securities. One step in the right direction is showing that anything and everything will be done on the governments side to assure the survivorship of Fannie and Freddie. Like it or not this is reality.
Next we do not need to see declines in property values stop all together. Things got out of whack during this last boom and they need to correct themselves. This is why a true bail out should not be part of legislature. Another thing we must not allow homeowners that can afford to make their mortgages walk away without feeling pain. This is the very reason I am not to thrilled with what the government has done to this point with giving those who walk away from their homes immunity from the IRS on the losses incurred by the lenders.
The incentives given to new home buyers have been written off like they are meaningless. This is strictly not the case for several reasons. First off the benefits to the economy are a shot of liquidity during this mess. New home buyers are almost guaranteed to spend the $7500 tax credit thereby proping up other areas of the economy so that the continued job loses in the housing industry are some what off set. Furthermore the fact these funds have to be paid back over time will help in not over heating the demand for goods. This will prevent it from causing a crazy spike in the inflation rate. As that would only magnify the pain Americans are already having to endure. This incentive will also move some of the glut of inventory we have so that we can get buyers to step back into the game.
The benefits to the buyer are having funds available to make purchases of furnishings and necessary improvements for the home they just bought. If you understand the time value of money you would understand that that a dollar today is worth more than a dollar tomorrow due to inflation. When you do the calculation of the net present value to the buyer based on the inflation rate the $7500 tax credit ends up having a true worth of $2257 today if they take the full 15 years to recapture the credit.
With this said I think the bill does leave something to be desired. More could have been done with less chance of the money being swindled away by local municipalities. At the same time the government nor the economists are going to fix this one. We need someone in the financial market community to step up like J.P. Morgan did in the credit shock of 1906.
Mr. Morgan got the whole financial community to assist in the market pain and help prop one another up. This prevented massive reductions in lending and soon the bad loans got written off all the while credit to businesses allowed for expansion of the economy straightening out the markets. Then investor confidence came back and the U.S. was booming again.
James Wheelock
and the winner is?
Since there were so many great comments we decided to pick two names out of a hat and give them both an advertising spot.
James Wheelock and Go-Zone were drawn!
James has not gotten back to the emails that were sent so Go-Zone if you want to send me a 125×125 logo I will get it up today!
Thank you to everyone!
Got my designer on it now!!
No love from James Houston Homes? I think he did a great job…especially the part where he said… “Next we do not need to see declines in property values stop all together. Things got out of whack during this last boom and they need to correct themselves. This is why a true bail out should not be part of legislature.”
Anyway, thanks for the free advertising.
That is to say, with even bigger tax breaks available for landlords— capital gains tax breaks and negative gearing— first home buyers are still playing on an uneven field. As Colebatch says,“ A smarter policy that would do more for first home buy…