The focus needs to be on the middle class engine, not Wall Street or individual sectors such as the auto industry. Focusing on the middle class engine will pull these vertical sectors of our economy along as we recover from the economic turmoil.
Housing statistics provided by the US Census Bureau were used to support my plan for moving the economy forward. The Census Bureau statistics tell us that the adjusted median home value virtually doubles every 30 years.
The plan will use the current value of real estate along with the projected future value of real estate to help facilitate loaning money to real estate owners allowing them to continue to own there homes and investments. The loan origination will come directly from the federal government and provide the low interest rate, for example 2 percent. The numbers are better as the loan rate gets closer to zero.
These loans will take into account the current real estate value and projected values up to 30 years out. These loans will also take into account the applicants ability to pay back the loans.
The federal government can use Fanny Mae and Freddie Mac to provide low interest loans. This plan will also go a long way toward making a large portion of the high risk mortgages good.
Example of how the program should work:
A person owning a primary home, a vacation home and an investment home as an example requesting a loan would have their current home values defined. Current valuation based on property taxes could be used as a way to quickly define home values. Assume a 30 year period for the loans in the examples. Each of the 3 properties will be eligible to be used as collateral in 3 separate loans. The loan amount to be funded could be up to 80% of the expected value of the real estate 30 years out.
Assume a single family home in MA current value $325,000. A vacation home in Florida current value $175,000. An investment home in Florida current Value $140,000. Based on the doubles in 30 years formula the projected values of the 3 homes will be $650,000, $350,000, and $280,000 30 years out. Loans based on 80% of the projected values of each home will be $520,000, $280,000 and $224,000 for a potential total loan amount of $1,024,000.
The monthly loan pay back amounts based on a 2% interest rate are $1,922.02, $1034.93 and $827.95 for a total monthly mortgage of $3,784.90.
Also based on Histoical information the property values would cover the outstanding balance of the loans in less than 8 years.
A program such as this will get the economy quickly moving forward again.
Steve Willis
of MA
@
Jan 01, 2009 08:17:09 AM
Charge off
I was asked by my sister what will happened if her second loan
was charged off by her lender.Does she need to make payments
or is another collection agency be assigned to collect the whole amount.
emelina
of CA
@
Dec 30, 2008 19:52:05 PM
things to know about the fed rate cut
I think it's time the government rewarded the SAVERS in this country instead of those who just spend, spend, spend, often beyond their means. Why not give folks with incomes of under $100,000 an extra 3-5% on their savings accounts as a way to encourage a reversal of our dismal lack of savings in this country. Why must the fed always place the non-saver's burdens on the backs of those that do save.
susan
of MI
@
Dec 20, 2008 12:08:48 PM
Amen to the credit card rates!
Those should be regulated and capped. Plus the over limit charges, monthly member fees and late fee charges with out a grace period are other forms of credit card companies posing as loand sharks.
Mini Schiro
of WI
@
Dec 17, 2008 18:09:09 PM
What about SENIORS?
Luke Mullins: Sorry, but your article is not "balanced". You purport to write on how the rate cuts "affect us". What about seniors who have seen the return on our CD rates decline steadily? Interest rate cuts may help SOME of the population, but they certainly do not help those who are retired and living on the income generated from CDs and other "safe" investments. How about including US in your comments? Why are all the economic articles only geared to the so-called "producing" generation - which, quite frankly, has caused much of the current financial mess due to their living beyond their means and general deficit-spending practices they no-doubt learned from their government? Why not gear something to OUR generation - you know, the RESPONSIBLE generation - the generation Tom Brokaw called "the greatest generation", the generation to did not spend more than we earned?
Chris McCarthy
of NJ
@
Dec 17, 2008 10:43:10 AM
4% Is The Key Number!!!
4% is the number we should always have as a goal for our economy, 4% unemployment, 4% growth, 4% interest rates, 4% savings rate, etc... if 4% is set as a standard goal our economy will run very well yet not as robust as some would desire. The challenge America faces is satisfaction with a fair return and/or profit versus the over-the-top, must have it all mentality. We should be saving our money and borrowing off our savings with revamped lending rules to build a firm economic foundation. With 0% money being loaned to banks, the only reason America isn't in hyper-stagflation is due to lack of money supply. Things can turn very bad is any stimulus package is passed under our current conditions. We must have a goal!!!
Ray Fisher
of NM
@
Dec 17, 2008 10:42:32 AM
ditto ditto ditto
The previous posters comments were so RIGHT ON TARGET that I want to repeat them ...
What happenned to raising the loan limits for Freddie mac and Fanny mae.Congress let those increased limits expire. What stupidity. Get it back on the table. The real estate market needs this, as well as, lowering of the fixed rate mortgage rates. It is also about time that Congress set max linits on what banks charge for credit cards. The rates allowed are loan sharking.
Consumers do not want to get burned with adjustable rates
common sense
of WA
@
Dec 16, 2008 23:10:58 PM
Mortgage Rates
The sooner interest rates get to 1%, directly to the homeowner on their primary home, the sooner the economy will begin its healing. Only then will we have the ability to pump liquidity back into our local markets. Our approach must be systemic and can only be achieved with the assistance of the government or we will conitinue to face more bitter financial destruction. Our ability to recover can only happen when we accept that interest rates are what got us into this tail spin (the "resets" from 2% to 6%) and low interest rates can stabilize us. The low interest must reach the homeowner if we are to level off and start growth again. We do not want to take pay cuts, we do not want our home values to decline, and we do not want a long term financial burden from never ending bail out plans.
MTD
of CA
@
Dec 16, 2008 23:09:04 PM
rates
i like cheese and boobs
george w bush
of FL
@
Dec 16, 2008 23:02:45 PM
All trouble essets can be cleared if we can workout some kind of lease to owene or put on arent with some targeted months to to own by the person who stay.OR to decrease inflated value sale at zero percent keeping same value for 20 years payments.
Steve Willis of MA @ Jan 01, 2009 08:17:09 AM
emelina of CA @ Dec 30, 2008 19:52:05 PM
susan of MI @ Dec 20, 2008 12:08:48 PM
Mini Schiro of WI @ Dec 17, 2008 18:09:09 PM
Chris McCarthy of NJ @ Dec 17, 2008 10:43:10 AM
Ray Fisher of NM @ Dec 17, 2008 10:42:32 AM
common sense of WA @ Dec 16, 2008 23:10:58 PM
MTD of CA @ Dec 16, 2008 23:09:04 PM
george w bush of FL @ Dec 16, 2008 23:02:45 PM
mukesh desai of NJ @ Dec 16, 2008 20:43:32 PM
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