STIMULATE THIS!
Saturday, January 24, 2009 at 5:46PM We can say that our new President Barack Obama has a fine economic mess on his hands, and we look to him to guide us out of it. Does he have a plan or not? Well, he does and how. The proposed stimulus package is detailed and very in-depth, and there are winners and losers. The good news is the Housing Industry is a Winner! The President discussed the plan on his weekly address.
I recently attended IAR's (Illinois Association of REALTORS) Public Policy Meetings in Bloomington, IL, and the stimulus plan and pending legislation were the topics of discussion.
President Barack Obama's proposed stimulus package has many facets. One, the AMERICAN RECOVERY AND REINVESTMENT BILL of 2009, addresses eight specific points. Some are clean and efficient energy; infrastructure, roads, bridges, transit and waterways; and tax cuts, to make work pay and create jobs.
So where does housing come in? Well the sub-heading for this portion of the bill says it all: Attacking the Housing Crisis. There is a proposed $13.6 billion in this section,and it addresses foreclosures. The NSP (Neighborhood Stabilization Program) allows non-for-profits and private sector individuals (with the capacity to do so) to purchase and rehabilitate foreclosed and vacant properties in order to produce more affordable housing and reduce blight. On January 15, 2009 Mayor Richard J. Daley had a press conference detailing the program.
Then there is HR525 which was in mark-up on Thursday, January 22, 2009. Congressman Charles Rangel of New York introduced the elimination of the repayment of the $7,500 First-Time HomebuyerTax Credit, and at last update, Congressman Lewis of Georgia has added extending the tax credit from June 30, 2009, to December 30, 2009. Read the attached letter from NAR (National Association of REALTORS) outlining these points.
Then there is HR384; it’s all about TARP (Troubled Assets Relief Program), or as Greg St. Aubin Director of Government Affairs for IAR (Illinois Association of REALTORS)likes to refer to it, "TRAP." I’m sure we all have our own four-letter word for this program. The bill tightens guidelines by increasing the reporting requirements along with other new conditions. This bill also has a foreclosure provision; at least $40 billion and no more than $100 billion be devoted to residential foreclosure mitigation. Also included is a homebuyer stimulus program.
With focus on housing as the underpinning to recovery, what remains to be seen is how lending guidelines will be affected, and what changes will support President Obama’s plans for the Stimulus Package. There is focus on lending in the afore-mentioned bills. Question is, are the banks going to act? The banks were suppose to lend when the initial $350 billion was injected into the system; that didn’t happen. What did happen was an elaborate dance of changing guidelines on a daily basis. I feel confident considering HR 384 has written in the Home Buyer Stimulus Program that the Secretary of the Treasury can purchase mortgages and mortgage-backed securities.
The banks could decide to go the Credit Suisse way, as reported in The Wall Street Journal and Reuters. The Credit Suisse way was, instead of cash bonuses to senior management, to gave out the bad paper/mortgage-backed securities as Christmas Bonuses. Quite brilliant! The balance sheets no longer have these bad assets; and these senior managers have the equivalent of coal in their stockings. I believe there could be copycats.
The other nice thing about some of the language: accountability is written into it. It is thoughtful and mindful of the people’s interests.
BTW, The losers are those companies that have already received TARP Money (Troubled Asset Relief Program). We know who they are. The cost of the Recovery and Reinvestment Bill is $825 billion, equal to 3% of GDP over the next two years, and $125 billon larger than the bailout bill.
What results or impact will happen when these bills pass? Or will they pass?
Tell us! Share your thoughts, praises and criticisms.
BLOG ON!
Reader Comments (3)
IMO the stimulus needs to get housing moving first or the recovery will not happen because housing affects labor, earnings, credit, and de-leveraging of the consumer. These are negative feedback loops that spiral downward on each other, and it begins with housing. I hope for a much larger tax credit for homebuyers, whether they own a home or not. The $7500 tax credit often is not nearly large enough to spur homebuying for a fearful public in a disinflationary economy, and especially in major metro areas where purchase prices often exceed $400k. The credit needs to last 2 years, be much larger, more in line with the purchase price of the home, and large enough to eliminate the buyers' income tax bill in either 2008 or 2009 or 2010. For example, a tax credit for a $400k purchase ought to be $20k, not $7.5k because the buyer will require $90k of income to qualify for that condo with 10% down, and $90k of income generally results in $20k of federal, state, and SS taxes. I don't have a problem with making the buyer pay back the credit over 15 years with no interest beginning 2 years after closing (Obama is about creating more responsibility and accountability, right?). That is still a sweetheart deal. that no family member will give! This will help to stabilize housing prices, remove inventory, capitalize banks, and loosen current draconian underwriting guidelines that is choking investment and buying, in my opinion.
Living in a small college town, the foreclosures are everywhere. In some neighborhoods you will see four to six houses for sale on the same street.
My concern is that whatever package we get, that it helps families remain in their homes while encouraging people to buy and banks to loan.
Very good piece. Very important for people to know that help is on the way,
The back bone of our economy has always been housing, The main goal would be to stabilize housing while creating jobs, Without jobs no one can afford to pay there bills. The uncertainty of the economy is making people reluctant to invest despite the attractive rates, low prices and tax incentives, With the media declaring all of the losses on wall street, the mismanagement and unaccounting for the stimulus money that the government gave to shore up the banks, to all of the layoffs that are coming, it does not give anyone the confidence to obtain more credit.
The average person who has to manage his/her micro economy is looking to stabilize housing, energy cost, food, fuel, medical and education for their family. While most consumers are learning to live on less saving for a rainy day has become the theme. For some people these rainy days have turned into economic tsunamis, that not only takes whatever you have but also whatever faith they had in the financial system and government is out the window.
There has to be some accounting with the lenders that received the funds from the government. There has to be flexibility for those in foreclosure, there also needs to be flexibility for those heading into foreclosure. This financial mess created by wall street greed has manifested itself into a global crisis that will take a few years to overcome, they spread the disease of financing=2 0with no accountability into a global mess. Those who lost their pension or retirement account find themselves extremely distressed, they worked all of their lives to have someone else recklessly invest their money with no accountability, This was a complete meltdown. Confidence must be rebuild with fairness
If the government is borrowing money to the lenders at a .5% why on earth are they still charging 5.5% - 6% it doesn't make sense.
Give back to the average consumer what they need to raise their family, then the faith in the consumer will return. Until there is fairness, until there is transparency in government and these companies that robbed the average consumer with their rates and more notably fees, we will struggle to grow.
Barack Obama has a mountain to climb, step by step you will see that he will get bipartisan support to repair some of the confidence lost by the average American, Housing, Jobs and fair available credit, will help turn our economy around. Freedom, is not free. It requires all of us to work together and give a little so we can be inspired to rebuild trust, faith and hope..
Note: I am sorry, I am very opinionated and maybe say a little too much, I will keep my responses brief from now on, But thank you for sending me your email.