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President Obama’s American Recovery & Reinvestment Act: What This Stimulus Package Could Mean for Housing
February 7, 2009 by Mortgage Align · Leave a Comment
With a new President in office and the economy posting worse news every day, it’s clear to everyone that there is an inherent need for something to be done….fast.
Before even taking office, President Obama introduced his ideas for a stimulus, which has been translated into a bill, The American Recovery and Reinvestment Act. The bill has been moving quickly and was just passed by the House. Being very familiar with Schoolhouse Rock, we all know the next step is the Senate. But before it goes to a vote, one very important thing must be addressed: housing.
Right now, the nearly $900 billion bill (HR 1) provides for the following items:
- $247 billion in tax cuts for working families
- $165 billion job-creating investment in infrastructure and science
- $153 billion job-creating investment for health
- $138 billion job-creating investment for education
- $82 billion job-creating investment for energy independence
- $21 billion job-creating investment for small businesses
- $72 billion to help Americans hit by economic crisis
- $10 billion in law enforcement and oversight
As the bill is being discussed in the Senate, there are some prevailing ideas as to what should be added, especially for dealing with the housing crisis. Some of the proposed ideas that could be added include:
- A moratorium on foreclosures – it could be proposed that troubled borrowers are allowed up to 90 days to keep their homes or work out a new loan with their servicer
- Expand credit for home buyers – there is currently a $7,500 tax credit available to first time home buyers. It could be expanded to all home purchases or increased to up to $15,000
- Target mortgage rates near or at 4% – provisions could be introduced to encourage lenders to offer a fixed-rate mortgage at 4%. The government would guarantee for a period of time to reduce risk on the lender. Since mortgage rates cannot ultimately be controlled, the government would be subsidizing the difference between the targeted rate and current mortgage rates.
- More loan modifications – proposed loan modification plans include reducing the monthly payment for troubled borrowers to 31% of their gross monthly income. The government would aid by sharing lender’s losses and pay some of the servicers’ costs.
Check back to Quicken Loans mortgage news for updates on President Obama’s proposed stimulus package and housing news as it happens.
