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President Obama has not even been on the job for a month yet, and already he has his work cut out for him. The economic downturn continues to worsen and unemployment is on the rise. The new President has made it clear that breathing life into the housing sector will be a focus of any stimulus plan. A plan introduced by Republicans the first week of February proposes targeting home mortgage rates directly. The bill would include decreasing home mortgage rates to as low as 4 percent. 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. The hope is that by shrinking the inventory, home values will level off.
Cheaper home mortgage interest rates are not the only thing lawmakers are discussing. One proposal is to extend a tax credit to all home buyers, rather than just those buying for their first home. That tax credit would also be raised. A buyer must make less than $75K per year (double that for those filing jointly) in order to be eligible for the credit. Reducing the amount of home mortgage foreclosures is another topic being addressed. Senator Dodd (D, CT) proposed a 90 day foreclosure suspension to allow distressed home owners time to try to establish a new agreement with their home mortgage lender.
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.
More coverage of mortgage refinancing, click getsmart.com.
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