By Brian Short, CMC, CRMS, GMA
Once again, as our elected officials are reviewing the automakers’ plans for $34 Billion of bail-out loans they have found themselves consumed with only the symptoms of the the real issue at the core of our current economic disaster – the FREEZING OF THE CREDIT FOR THE HOUSING INDUSTRY!
Our current recession, having officially begun in the last quarter of 2007, is NOT because the auto industry is not selling enough cars to keep their bills paid. The reason for the worst downturn in the US economy in over 40 years is NOT because the retail sector (except for WalMart) is still not seeing any “black” even after “Black Friday”. The reason retailers are still seeing “RED” , even after “Black Friday” is simple – – the FREEZING OF THE CREDIT FOR THE HOUSING INDUSTRY!
The explanation for the unprecedented downturn in manufacturing, the highest jump in unemployment in 40 years and the seeming irreversible plunge in consumer confidence is the FREEZING OF THE CREDIT FOR THE HOUSING INDUSTRY!
For our politicians and bureaucrats to continue spending time working on symptoms of the REAL PROBLEM will only accentuate the depth of this crisis and delay the turn around. What needs the attention of the Treasury Secretary, Federal Reserve Chairman, Senate Banking Committee and the House Financial Services Committee is what will stimulate the housing industry – plain and simple!
The $700 Billion promised by the Treasury Secretary to be used for troubled assets and unsellable mortgage backed securities must be used for its original purposes and not to prop-up other sectors of the economy whose recent record breaking losses are only a symptom of FROZEN CREDIT FOR THE HOUSING INDUSTRY! The housing industry has been in a free-fall for nearly 2 years! Before any recovery plan will be successful, Congress must require that the Treasury and Federal Reserve not divert that money to other needs until the credit for the housing industry is freed up and thawed out.
Here is our plan to get the housing industry off of “dead center” and get the entire US economy flowing with cash.
1. Open FHA Loans to investors and 2nd home buyers. Use the FHA 203 (K) loan (See Dec 1, 2008 article on this site.) to rehabilitate distressed and foreclosed properties and open up the use of the traditional FHA 203(B) Loan for those who can afford and need to buy a second home. We must move the current homes on the market to those who could quickly buy up the inventory and possibly make some money on speculating on the front end of a housing recovery.
This move alone, will bring millions of buyers back into the housing market. Distressed properties do not qualify for Fannie or Freddie loans if they have damage to walls, floors, windows or doors. Speculators and investors will breathe new life into those houses which need repair before they can be sold in today’s market. These investors and speculators have the cash, experience and knowledge to buy up (and repair if necessary) the current glut of houses and make them rental houses, second homes and ideal marketable properties.
2. Revive the seller-assisted Down Payment Assistance Programs for home buyers who have no down payment money to put toward a home purchase. This will put first-time home buyers back into the market even if they have no cash for down payment purposes. Prior to the October 1, 2008 shut down of these programs by HUD, many in our industry were using the Down Payment Assistance Programs (DPA’s) for as many as 80% of their closed purchase loans.
Those who want to move but still have homes to sell will not be able to be added to the mix of potential home buyers until we can help them find buyers for their properties. The re-introduction of the DPA’s will bring those first-time home buyers (or those who sold their houses and made nothing on the sale of their home because of depreciating home values) back into the market who have been sidelined since October1.
3. Provide tax incentives for those who buy houses. We must urge Congress to consider giving a tax credit for any down payment or closing cost money used in the purchase of a house. Homeowners already receive their credit for mortgage interest paid during a year, but that must be expanded to include any monthly payment paid toward principle or mortgage insurance and down payment, closing costs, and repairs made to a distressed or outdated property bought and repaired or updated to be resold or made into a rental.
How can those who are willing to be part of the solution be rewarded for stepping up to the plate and taking some big swings in order to help get the housing industry flowing with buyers, sellers and builders again? Give them as many tax incentives as possible to bring them and keep them in the housing market buying and selling and repairing.
Real troubled times require real ideas to deal with the real problem – REAL QUICK!