Mortgage Loans and the Stimulus Bill
05/15/09
The President is out promoting the new economic stimulus plan, as he gets ready to sign it into action the end of February. The economy is suffering from the greatest slump since the Great Depression. A large part of the stimulus bill will be aimed specifically at the ailing housing market, which is blamed for much of the financial crisis that began last year. The specifics of how the bill will aid the sector are not yet public, but consumers having trouble meeting the obligations of their mortgage loans are hopeful the bill will offer them some aid.
It is anticipated that the President will announce the specifics of the housing and mortgage plan next week in Phoenix, Arizona. There is, however, one thing that is expected to be included in the plan. Consumers purchasing a new home for the first time (whether they are paying cash or taking on mortgage loans) will receive an $8000 tax credit. A lot of financial experts think that the credit by itself will not incent enough potential home purchasers to buy now. Regardless of the tax credit, lending practices for mortgage loans are stricter than they used to be. To be offered loans, borrowers must now have better credit reports and scores than ever before. And requisite down payments are much higher than they were prior to the credit crisis. So even with a large tax credit, consumers must have the cash to provide a substantial down payment to qualify for mortgage loans. Still, other economic experts think any incentive will give a boost to the real estate market. There will be some buyers who are eligible for mortgage loans who will decide that the combination of low interest rates, a tax credit and lower prices makes this a good time to buy. And any forward movement will be an improvement for the housing market.
One of the things affecting the housing market the most is the increasing foreclosure rates on home loans. The stimulus plan is expected to contain some relief for consumers who are in trouble with their mortgages. There is an expectation that banks may be required to lower the monthly payments on some mortgage loans to help those in danger of foreclosure continue to make their payments. A fair number of banks have simply decided to delay foreclosing on additional properties. They are awaiting the details of the new stimulus plan to determine how the modifications of loans will affect them and their customers.