Stimulate, Don't Alienate - A Mortgage Proposal for Powerful Stimulus !
Let me start off by saying I am not a huge fan of Government stimulus, but in these uncertain times where the economy is tinkering on a double-dip recession, it is important to consider all the options. The Government has already implemented the tax credit for first time home-buyers as well as mortgage modification programs for those behind on their mortgages to try to slow down the foreclosure crisis.
BUT what about the millions of Americans who already own a home but cannot refinance since their home has little or no equity ? They purchased their property in the last 5 or 10 years at much higher mortgage rates, have paid their mortgage payment on time every month, have seen billions of stimulus dollars spent everywhere around them but have not seen a dime of benefit. I think now it is a perfect opportunity to create a Federal sponsored program centered around these folks. It would allow responsible homeowners who have NEVER had a late payment on their mortgage in the last 2 or 3 years to refinance at a substantially lower rate and save them hundreds of dollars a month, thus thousands of dollars a year.
These homeowners are constantly getting the letters in the mail asking them to refinance at 4.25 percent and they see the rates on the news and in the paper every day. They call their mortgage lenders asking to refinance only to get rejected once they realize that there is little to no equity in their homes or perhaps they cannot document their income as they are self-employed. It is so frustrating for these folks as we hear it every day ! To make it simple and allow for it to work, the program would require NO appraisal and no documentation of income, just LET them refinance since they have already shown that they are credit-worthy borrowers !!
This would be REAL stimulus for our economy. These homeowners would have an immediate surplus of several hundred dollars a month. Maybe $500 to $700 a month. Perhaps the program could have a cap on it. Those additional funds could get more consumers back into the mall, increase consumer confidence, reduce strategic defaults and foreclosures !!!
I have heard some analysts talk about this here and there but am surprised that this has not gained traction. Why focus in the past on stimulus for homeowners who could not pay their mortgages as they only defaulted again and again ? Why focus on stimulus for first time home buyers who would probably buy anyway because mortgage rates are so low ? Let's focus on the huge current base of homeowners and LET THEM REFINANCE with the rates that they see everyday at 4.25 !
Imagine how happy everyone would be if they woke up tomorrow with a mortgage rate of 4.25 percent ! If you currently have a mortgage payment, do the math on what your mortgage payment would be at the lower rate ! How much would you save per month ?? Remember, this program would not be for everyone. Only for those homeowners who have NEVER had a late payment in the last 24 or 36 months. Let's have an incentive or reward for doing something right !
I know this is an interesting and controversial proposal or program and something that may never happen. But am interested to see what your comments and thoughts are. Please share below !
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