Disclosure : Let's keep politics & political views/parties out of the comments. This post is my opinion and the figures used below are solely for example and not fact.
As many of us know, the 2009 Stimulus packageis about to be approved. Let's clear the air on this issue though. The new bill has not been approved as of yet, only that there is tentative agreement in the Senate. I am reading too many blogs stating that this stimulus package has been approved. It still needs the Senate's final vote for approval, likely reconciliation with the House Bill, and the President's signature.
We all know that the stimulus bill is supposed to stimulate the economy, by spending money and providing spending money through tax cuts, which it will create more jobs.
What about the fact that many have acknowledged that this new bill is loaded with fluff? Will this stimulus bill hurt us more than help us? Listen to this video : Yahoo Finance - Are we just handing money out left and right, keeping our fingers crossed, hoping? Do we have too many politicians that actually don't understand money, finances, and how an economy works? Just like we couldn't drill our way out of the energy crisis, we can't spend our way out of the economic crisis, especially without bankrupting our future.
My Proposal for the housing part of this stimulus bill : Make sure that the seller-funded down payment assistance programis allowed back by congress, the very same people that discontinued this program. Do you know why they stopped this program? Because of HUD's study stating that 1 out of every 3 homes that used a DPA program went into foreclosure. But wait, that was a government study. Since then, there have been a few independent studies that have said otherwise. For some of these studies, please read the Economic Impacts of the DPA's.
Here is my fear.... I have not heard anything about the seller-funded DPA program being mentioned in the new Stimulus Bill. Yet we keep hearing so much talk about raising the new tax credit or the tax incentive from $7,500 to $15,000. Let me ask you a question. Even with the new proposed $15,000 tax credit, how would you expect borrowers to buy these homes when one of the main problems is that the average person can't save that much money. Yes, I am well aware that this higher incentive will entice borrowers to find the means to save extra money or to borrow the money in order to buy a new home. But let's be realistic here, did this happen as much with the $7,500 tax credit? Do you know that the average American doesn't have more than $1,300 in their savings account? All I have read this weekend is how awesome this new tax credit of $15,000 will be and how it will help stimulate our housing market. Do you know that there are only two ways to obtain this new money? You either can reduce your federal tax withholdings or you have to buy the home first, and then file your taxes in order to receive this money.
Drew Sygit gives us some great reasons to why this new $15,000 tax credit will be hard to use. please read : The $15k tax credit - How many homebuyers will qualify
So how can we make this all work? Please read my plan below.
Why can't we write a bill or add a program such as mentioned above, to include the downpayment assistance program with the tax credit incentive, all rolled into one. Having certain provisions to include :
- In order to use the DPA programs, you must have credit scores above 600
- If you buy a foreclosure, you get the full $15,000 tax credit & you don't have to repay it back, if not, you get $7,500 as a tax credit and you have to pay it back
Keep in mind, if buyers qualify properly with credit and income, as a full doc loan, but lack the proper assets, we can still make this work. It's worked in the past. And Matt Freemanmade an excellent comment below that I have stated in many of my blogs about DPA's. By utilizing these DPA's, it allows the buyer to keep their funds, using them for emergencies, having reserves. Read Matt's full comment :
Why not force the issue about these foreclosures. If you read these independent studies and as mentioned above, the seller-funded downpayment assistance programs do not cost the tax payers money. And many of us know that buying homes helps stimulate the economy in many ways. It not only puts more money back into the building sector and supplies, but that it can create more jobs. Nehemiah Corporation, which started in 1994, is the leader when it comes to these seller-funded DPA's. What I don't want to hear is that without the buyer having sweat equity into their purchase, that this is the main reason for foreclosures. How about the high rate of job losses? How about for the fact that there are many that put 10% down or 20% down, and even those people went into foreclosure. How about those stated income programs and the no doc programs that either allowed you to change your income or not show income. That many of these programs created foreclosures.
Do you know that the Nehemiah Corporation, because of their efforts, not only helped create more jobs, but that they even put back some of their own money into housing communities, that they develop, support, and sponsor other faith-based communities and ministries. Read who and how they help : Transforming Communities by way of Nehemiah helping.
Conclusion : Why can't we think these things through first and not just throw money out the window? How can we save the housing sector without costing the tax payers millions of dollars? How come nobody has truly explained how the new stimulus bill will stimulate the economy except by stating that this bill will stimulate the economy? They throw words out such as infrastructure and tax cuts. But I have not heard specific details. If this bill is for short term growth, but not sustained, it will create more problems in the near future. Is this just another band aide that the government is so good at applying, yet it sticks or helps down the road?
And let's take this one step further. If those foreclosures need work and are as-is, you can also use the FHA 203-k loan. I meant to say this, but forgot to put that in here. Ron Wither's made this comment below. Not only can we fix these houses up, but we can make them Energy Efficient with the EEM program, which is the Energy Efficient Mortgage program. Please read : Energy Efficient Mortgages & 203-k loans
What do you say? How can we get behind an idea such as the one I mentioned above? How can we get the government to look at this? Let's not be couch potatoes that will hope and pray, let's be doers.
For an opposite opinion of this topic, please read this by my AR friend John MacArthur : DPA... nice, but not the answer to this mess - fyi, I never did say that my way was the answer to this mess, but we do need to try and be creative and not just one way. John and I had a very good conversation about this after reading both posts and we see eye to a lot of the same issues and concerns. Enjoy..
** All pictures in this blog post & in the presentation are from www.istockphoto.com **
- FHA Loans - USDA Loans - VA Loans -
- Energy Efficient Mortgages -
- Conventional Loans - 203 k loans -
- Mortgages -
Experience & Knowledge at its BEST !!!
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger
