While our newly elected president is busy drumming up public support for the stimulus plan with a town hall meeting in deepest middle America, intense negotiations continue in the Senate and House.
Much of the stimulus talk has focused on bolstering the economy by creating jobs and reviving spending. But how will the stimulus package affect the mortgage industry? Regardless of politics, no one denies that at the center of the financial crisis are floundering mortgages that devalue bank balance sheets and stifle lending markets.
Undoubtedly, part of the stimulus goal is to loosen credit markets that provide home loans to individuals. According to a recent Washington Post article, the administration’s plan is to insure the losses on some failing assets while implementing incentives for private investors.
But let’s not forget that behind every mortgage is a homeowner! So what does all this Capitol Hill talk mean to average homeowner citizens hoping to refinance. Or for potential buyers planning on purchasing a home?
At the moment, it’s anyone’s guess.
The current focus of the stimulus plan is to come to an overall agreement. For now, President Obama attempts to persuade lawmakers to include funds for struggling state and local governments, and both sides of the aisle continue to grapple over spending proposals and tax credits.
While the rescue plan will determine how the government spends the remainder of the $700 billion approved by Congress in October, so far the administration hasn’t made much progress on the section of the stimulus package that aims to spend $50 to $100 billion to aid homeowners. At best, they may reveal broad outlines of that plan tomorrow. But specifics are unlikely to emerge before Congresses’ self-imposed voting deadline of Friday, February 13, 2008.
According to the Post, one proposed idea is to have Fannie Mae and Freddie Mac set loan modifications standards for homeowners that face foreclosure. However, the Post’s sources caution that the plans so far are not solid and subject to compromise.
In the meantime, what we DO know is that rates remain at historic lows. But no one knows for how long. The economy is highly volatile, and even the experts can’t be sure how credit markets will react to the news from Washington as negotiations for the bill progress. With today’s rates at record lows, now is a great time to start a dialogue with a mortgage professional.
Related Info
- Get today’s mortgage rates.
- Find out which home loan option is right for you.
- Learn more about the fixed-rate mortgage.
WE WANT YOUR FEEDBACK
When you say “up for short sale,” do you mean you are listing the home for less than you owe?
A true short sale is when home owner sells the mortgaged property for less than the balance of the loan, and in turn gives the proceeds to the lender, who has agreed to settle the loan at a loss. The deal must be negotiated between the borrower and the bank. Some lenders do forgive the remaining loan balance, but others do not. The remaining balance is called the deficiency, and it is possible that banks can later request the deficiency – known as a “deficiency judgement” – if you do not negotiate a deficiency forgiveness as part of your short sale agreement.
Our home is currently up for a short sale. We cannot afford the home even in a re-finance. After the short sale we may be responsible for the balance of the Mortgage. The home cost @ $475,000.00, and a short sale price $ 270,000.00. When the short sale takes place will we be responsible for the balance, Est $300,000.00 ?
respectfully,
James F Bowen III