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Hillary's housing solution
Hillary today proposed $30 bn more to help bail us out from our national home financing crisis. That sounds great except that I'm pretty sure we're (the taxpayers) the ones paying the $30 bn. And I don't know about you but I already have a mortgage to keep up with!
Is there any good solution to this mess?
Sandi, you're the resident expert in this area. Do you have any thoughts?
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I'm certainly not Sandi, and am definately no expert, but I have a common sense idea. Why not impose an interest rate limit on home mortgages, something within reason. Say from 5-6 percent for those with really good credit, to a max of 8 percent to those with lesser scores. Make those limits immediately retro-active on all existing loans, such as ARM, etc, if requested by the consumer... with a low minimum fee if any, not the high cost of refinancing.
The homeowner would benefit, the mortgage companies would still make money, and it should stop the epedimic of foreclosures that is helping to drive the ecomomy down.
What about the people who can't even afford 5%? It's my understanding that the predatory lending primarily took advantage of those for whom the increase from 4 to 5% would be unaffordable. Plus, I doubt our mortgage company would be willing to let us switch from 7.25 to 5 or 6, even though we have stellar credit. I hope they come up with a solution, though. I have such mixed feelings on the matter. On the one hand, a contract is a contract and I don't see why anyone should be bailed out. On the other hand, you don't want communities where >20% of the population is at risk of eviction.
I'm showing my ignorance here, but how in the world does one get a 4% interest rate on a mortgage? My understanding is that people with ARM or high risk mortgages start out with an average interest rate, but that the rate increased dramatically, on a steady basis, after a year or two.
I don't think my solution is ideal, but it is a common sense one that would not involve a multi billion dollar spending bailout.
I could be wrong, but I thought the whole point of an ARM is that you get a lower rate but you're taking the risk. We got 4.5 fixed, and at the time it seems like there were ARMs going 3.75 and lower. I know one family that got a 1.5, but I'm not sure how they pulled that off.
I'm not certain exactly how the predatory lending worked. I thought they were lured in with the ultra-low interest, not realizing that it would increase over time. For the most financially-strapped homeowners, even 5% may not be affordable. But I think there were several different predatory mechanisms in place, and I honestly have no idea what we can do. I don't understand the system well enough. Look at this map I found of recent foreclosures in one sector of Minneapolis:
Crazy, huh?
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Exactly