Friday, December 5, 2008

Help for Home Owners?

$700 Billion, $300 Billion, $25 Billion, it seems that there is no end to the line of industry leaders standing before congress with their hands out. The banks got theirs and held onto it while others took advantage of the financial redistribution without making any changes to their business extravagance.

It's been several months now since the launch of the bail-out, and the only change we've seen in the news that impacts you and me is that it's gotten worse. More jobs lost, continued foreclosures and less money spent on Christmas shopping.

I like our economy and believe appropriate actions should be taken by our government to protect it. But isn't it time something is done to help those of us who work hard every day just to support our families and pay our mortgages? Yes steps must be taken to protect jobs and stem the rising tide of unemployment. But the answer is more specific than "bailing out" or "lending out" financial institutions, automakers, and no telling who else. It's time for a specific action plan to address issues that live on my street and your street.

In recent days there has been talk on "the hill" of making really cheap money available for homeowners. Just how cheap? How about 4.5% fixed for thirty? We haven't seen rates that low since the early 1960's.

Rates that low could make a significant difference in monthly payments. For example, a $125,000 30 year fixed mortgage at 6.5% would have a monthly payment of $790.08. That same amount financed for 30 years at 4.5% would have a monthly payment of $633.35, that's a monthly savings of $156.73 or $1880.76 per year!
So where does one line up for these great rates? Well, not so fast buster. You see this is still just in the "talking" stage. And there are no guarantees that any substance will emerge out of all this talk.

In fact dig deeper into the rhetoric and you'll find the consumers targeted for these historically low rates are new home purchasers. That's right, current intent is to make these rates available only to consumers purchasing homes, leaving the rest of us who already own a home out of the loop.

The national board of Realtors is pushing hard to get this legislation approved. They believe that the best way to protect our economy is to shore up home values, and the best way to do this is to reduce existing inventory. In their mind it's the law of supply and demand; fewer available homes translates into a stabilization of existing home values.

Okay, maybe this is true. But stabilizing home values does little to help slow the increasing number of foreclosures. And every family losing their home to foreclosure is one more family that finds themselves prohibited from buying a new home for up to 5 years.

It's time that some of these monies be used to help those who want to purchase new homes become responsible home owners. It's also time for some of these funds to be appropriated in ways that help home owners struggling to make their payments refinance to a low fixed rate they can afford. These are not easy answers with "point and click" applications pre-made, ready to un-box and implement.

There will be difficult decisions with equally problematic clarifications that will have to be made. But can these issues really be more complex than what we are already facing? For months leading up to the Presidential election we heard speeches about the importance of implementing new financial policies to protect Wall Street as well as Main Street. Well, we've seen Billions of dollars funneled into companies represented by cryptic symbols on Wall Street. And the effect of this cash infusion has done little to address the needs of Main Street.

I say if the government is going to make 4.5% available to consumers they should make it available for both purchases as well as refinances. And for those consumers who are already having difficulty making their monthly house payments, there should be a plan in place where they can find a workable solution with their current lender to renegotiate their existing mortgage into a rate and payment they can live with.