Economic Stimulus Package Generates Mixed Response from Industry
- Jan 25, 2008
By Anuradha Kher, Online News EditorWashington D.C.– Kieran P. Quinn, CMB, chairman of the Mortgage Bankers Association (MBA) praised the Bush administration’s new stimulus package, announced this week, that includes housing provisions designed to help borrowers and stabilize the housing and mortgage markets.Quinn said in a statement, “This stimulus package will bring much-needed help to consumers and restore some stability to the housing and mortgage markets. Reform of the Federal Housing Administration (FHA) has long been a top MBA priority. A more modern and vigorous FHA will provide another option for first-time and low- and moderate-income borrowers and borrowers who need to refinance existing mortgages.”Quinn also said that the temporary increase in Fannie Mae and Freddie Mac’s loan limits, as well as a boosting of the FHA loan limit, should return liquidity to a portion of the mortgage market that has essentially been at a standstill since August. “This will be especially helpful to current and potential homeowners in areas of the country that have seen the largest price run ups during the recent boom. It is not coincidental that many of these areas are the same ones that are now facing the most difficulty,” said Quinn.But unlike Quinn, Conrad Egan, president and CEO of the National Housing Conference, is less optimistic about the package. “The package includes benefits in the form of tax rebates. But these rebates are very small, so I am not sure how much of a difference they will make,” Egan tells MHN. “When the Bush administration announced the last stimulus package, most of the tax rebates went into people’s savings accounts. I am not sure this action will stimulate the economy,” he says. Egan says he had hoped that more would be done to preserve the neighborhoods affected by foreclosures. “The vacant homes are having a very destructive impact on neighborhoods, which also affects the multifamily industry,” he says.One approach that the NHC is recommending for helping troubled borrowers stay in their homes is to adopt a shared equity strategy. “Under this approach, a mortgage held by an at-risk borrower is split into two mortgages. The first is a standard 30-year fixed-rate mortgage at a level the family can afford. The balance of the original mortgage is converted into a silent second mortgage in which no payments are due until the home is resold (or refinanced). Upon sale of the home, the buyer repays the new first mortgage (the 30-year fixed mortgage), plus a share of the remaining proceeds, which goes to satisfy the silent second mortgage,” concludes Egan.