Obama Administration Housing Program – Another One!

Not a governmental body to sit idly by, the Obama administration announced yet another housing program to aid struggling homeowners with unaffordable home loans.  A $14 billion allocation from the administration’s existing $75 billion foreclosure-prevention program is being thrown at solving the problem of under-water homeowners. 

The program requires mortgage companies to participate in the administration’s existing foreclosure prevention program with consideration to slashing the amount borrowers owe.  The pay-back is incentive payments to the lenders if they reduce the principal that borrowers owe and offer them new loans.  New loans will be backed by the Federal Housing Administration.

The plan also includes three to six months of temporary aid for borrowers who have lost their jobs. There will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans – a problem that has blocked many loan modifications.

Will this, the latest and greatest government housing rescue program really work? Well, so far all the prior Obama administration housing rescue plans have been dismal failures. Personally, I don’t see this current plan making a significant difference.

Let’s face facts … many people purchased homes way out of line with their realistic budgets. Plus, a large percentage of recent homeowners who had their home loans modified are once again behind in payments.

What is so wrong with renting? It seems that all these government programs are doing is prolonging the housing recovery.

In my 10-1-08 post entitled #1 EZ Fix to The U.S. Housing Market I stated:

“For the government to come in with this huge bail-out now, would just prolong the housing decline.  I’d rather see the government stand aside and let the market forces determine the true area average home selling prices.

“For those who think a government intervention is the only way out, I say do it without direct taxpayer money.  The undisputed key to this recovery is housing.  If the government truly wants to ignite a fire under the housing market, I personally would propose a very simplistic approach that would have immediate results.

“The government should pass a bill that allows any home purchaser, owner-occupied or investor buyer, who buys a residential property within the next two years and holds that property for a minimum of three years (and a maximum of ten) to be free of federal capital gains taxes upon selling the property.   The potential, tax-free profits on my idea would be a huge incentive for investors to jump back into the residential housing market.  This increased demand would clear the built up housing inventory in a matter of months for most areas.”

So the government is coming in again with another bail-out.  Obviously, they did not see the problem from my perspective in the fall of 2008 … nor any time since.  The trouble continues to drag on.

ABOUT THE AUTHOR

brokerforyou Bob Schwartz, is a Certified Residential Specialist, CA licensed real estate broker with www.Brokerforyou.com. Bob has over 30 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via e-mail at bob@brokerforyou.com or visit his highly popular San Diego real estate website at: http://www.brokerforyou.com
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