Archive for the ‘Barrack Obama real estate solution’ Category

Presidential Candidates Offer Opposing Views on the Ailing Housing Market

Friday, February 8th, 2008

        There is not much debate at this time about whether or not certain segments of the housing market are in fact in a crisis, but rather the real issue is how we deal with our current situation.  Some advocate letting the free markets play themselves out with little government intervention.  Ron Paul, the conservative Republican, is perhaps the strongest proponent of this.  for causing the “marginal buyers to get off the sidelines when they may not have known what they got themselves into.”  Paul does not support the increase in relaxation of guidelines in such programs such as the FHA programs and Fannie Mae guidelines.  As you may be aware, President Bush has been pushing for increases in FHA and Fannie Mae loan limits as well as proposing a freeze on current ARM rates for buyers who have been making their payments on time at the introductory rate, but may have difficulties once their rates reset.  His economically sound central argument places the ultimate blame on the , saying that their unprecedented rate cuts to 1% was the creation of unhealthy exuberance for borrowers, thereby creating this mess we are in.
        On the democratic side, for current homeowners and also a freeze on foreclosures for 90 days.  While some may argue that this might inject additional liquidity into the economy by allowing these homeowners to spend more free cash, others such as those in publications like Fortune magazine have argued that Hillary’s buzzsaw plan could cause a massive increase in long-term rates for future home buyers. With Hillaries plan, bond investors, already uncertain about reinvesting in mortgage-backed securities would scatter to find other financial instruments to park their money.  This would cause a huge long term hike in rates and be highly detrimental to affluent borrowers.
        Barrack Obama sees a much different root problem and solution to it.  His answer is for more accountability in the real estate industry itself.  who may have misled buyers as far as the programs that they were getting themselves into.  He proposes increased penalties and tightening of guidelines for predatory lending, and does not necessarily believe that direct government intervention other than tax breaks for middle-class homeowners is necessary.  While this is a great idea in and of itself, I do not believe that Obama has gotten to the root of the problem in his solution.
        Those who believe in free-market economics obviously are in support of letting the markets work themselves out.  I would consider myself to lean more in this direction, although I do believe that some government protection of the industry must happen as there is plenty of room for fraud and manipulation of fees and buyers as the current guidelines now stand.  We are seeing some of this happen already, specifically in Nevada and other states as loan officers are becoming directly responsible for making sure that stated income or non-verified income loans are reasonable and justified.  This shifts the responsibility more on to the lending institutions and less on the borrowers.
        I would, however, strongly encourage fully-verified income buyers to take advantage of the continued low level of long-term interest rates and strength of the mortgage bond market.  This situation may not last long as we are likely heading for a recession.  Mortgage bonds as well as the entire financial industry has the chance of pushing bond prices lower and then in turn, mortgage rates higher, so your timing is critical. ?
        The other current good news is that Fannie Mae is looking at increasing conventional loan amounts to somewhere in the range of $600,000-$700,000, where the previous limit was $417,000.  This means that jumbo loan limits are pushed higher and will allow the lower conventional rates to be applied up to these new higher loan limits.  This will help savvy borrowers looking to finance new properties at deeply discounted interest rates.  However, you must act quickly, as this situation is precarious and has the potential to evaporate quickly.  Contact me if you have any questions on luxury financing or the current status of the housing market nationally or specifically in Nevada.  I look forward to serving you and providing you with your best options available.

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